Mumbai, October 28, 2020 :
Larsen & Toubro recorded Consolidated Gross Revenues of ₹31,035 crore for the quarter ended September 30, 2020. During the quarter, with the labour at various project sites reaching near pre-covid levels, the businesses saw a pickup in execution momentum compared to Q1 FY 2020-21 and achieved a sequential growth of 46%. However, the revenue declined by 12% y-o-y due to the lingering impact of the pandemic during the quarter under review. International revenue during the quarter at ₹12,148 crore constituted 39% of the total revenue. For the half-year ended September 30, 2020, the Consolidated Gross revenue at ₹52,295 crore recorded a y-o-y decline of 20%.
Net Profit After Tax (PAT) and share in profit / (loss) of joint ventures / associates from continuing operations before exceptional items for the quarter is at ₹1,410 crore, registering a sequential improvement of nearly 4 times reflecting pickup in the business momentum. However, the impact of pandemic in terms of lower revenue, higher credit provisions in the Financial Services business and disruption of the Metro services, led to decline of 45% vis-à-vis reported PAT of corresponding quarter of the previous year at ₹2,552 crore.
Exceptional items during the quarter ended September 30, 2020 comprises of impairment of funded exposure in the heavy forgings facility joint venture and impairment of assets in the power development business.
During the quarter the Company achieved the completion of divestment of its Electrical & Automation business to Schneider Electric (SE), France and has transferred the business to Schneider on receipt of consideration on August 31, 2020. Net Profit After Tax from Discontinued operations for the quarter comprises of profits of Electrical & Automation (E&A) business till the date of divestment to Schneider Electric (SE) on August 31, 2020 amounting to ₹45 crore and gain of ₹8,101 crore (net of tax) on conclusion of divestment of the business. The gain has been computed based on consideration accrued as per the terms of the respective agreements and is subject to post transaction closing adjustments in subsequent quarters.
The overall consolidated Profit After Tax (PAT) including the PAT from discontinued operations for the quarter ended September 30, 2020 is ₹5,520 crore and for the half-year ended September 30, 2020 is ₹5,823 crore.
Cash generation from operations was robust during the quarter under review which was strongly supplemented by proceeds from the divestment of Electrical & Automation business. The Company has declared a special dividend of ₹18 per equity share to mark the successful completion of the divestment.
The Company bagged orders worth ₹28,039 crore at the Group level during the quarter ended September 30, 2020 registering a sequential improvement of 19% over previous quarter, but a decline of 42% vis-à-vis previous year, on account of deferment of award decisions largely caused by the pandemic. International orders during the quarter constituted 36% of the total Order Inflow. On a cumulative basis, the Order Inflow for the half-year ended September 30, 2020 stood at ₹51,613 crore, registering a decline of 41% over the corresponding period of the previous year.
The Consolidated Order Book of the Group stood at ₹298,856 crore as at September 30, 2020, with international Order Book constituting 24% of the total Order Book.
Infrastructure segment secured orders of ₹14,522 crore, during the quarter ended September 30, 2020, lower by 7% compared to the corresponding quarter of the previous year. Though ordering activity picked up compared to Q1 FY 2020-21, bid deferrals and loss of some select prospects impacted the Order Inflow.
Major orders received included an international order in Water Effluent & Treatment vertical, domestic orders for rural water supply schemes and some international orders in Power Transmission and Distribution vertical. International orders at ₹4,024 crore constituted 28% of the total Order Inflow of the segment during the quarter.
The Order Book of the segment stood at ₹220,430 crore as at September 30, 2020, with the international Order Book constituting 22% of the total Order Book.
Infrastructure segment recorded Customer Revenue of ₹12,969 crore for the quarter ended September 30, 2020, which though registering a decline of 20% over previous year, sequentially more than doubled revenues of Q1 FY 2020-21, with labour at various sites reaching near pre-covid levels. International revenue constituted 27% of the total customer revenue of the segment during the quarter.
The EBITDA margin of the segment during the quarter ended September 30, 2020 is at 6.4% vis-à-vis 7.2% recorded in corresponding quarter of the previous year, mainly due to changes in stages of job progress and lower volumes due to the pandemic. Sequentially the margin has, however, improved by 10 bps.
Effective from April 1, 2020, Smart World and Communication business which was reported under Infrastructure Segment has been reclassified to "Others Segment" and accordingly, previous year figures have been regrouped wherever necessary.
Power Segment recorded muted Order inflows during the quarter ended September 30, 2020, as the ordering activity continued to be lacklustre, with postponement of key tenders.
The Order Book of the segment stood at ₹14,695 crore as at September 30, 2020, with the international Order Book constituting 6% of the total Order Book.
Power Segment logged customer revenues of ₹687 crore during the quarter ended September 30, 2020, registering a y-o-y increase of 42% on the back of higher opening order book. International revenue constituted 7% of the total customer revenue of the segment during the quarter.
The segment EBITDA margin for the quarter ended September 30, 2020 was at 3.1%, lower compared to 4.1% recorded in corresponding quarter of the previous year. Decline in margins reflected the stage of execution of the jobs with a large proportion of the Order Book yet to cross margin recognition thresholds.
Heavy Engineering segment secured orders at ₹323 crore during the quarter ended September 30, 2020, recording decline of 53% compared to the corresponding quarter of the previous year due to deferment of orders in the Nuclear and hydrocarbons business.
The Order Book of the segment stood at ₹3,377 crore as at September 30, 2020, with 45% being international.
The Segment recorded Customer Revenue of ₹601 crore registering a y-o-y decline of 3% over the corresponding quarter of the previous year, while sequentially it increased by 59% representing a significant improvement over operations during the lockdown period in Q1 FY 2020-21. International sales constituted 59% of the total customer revenue of the segment during the quarter from jobs executed for customers in America & Europe.
The EBITDA margin of the segment at 5.1% for the quarter ended September 30, 2020 registered decline over the corresponding quarter of the previous year at 24.9%, on account of prudential provision made towards a warranty claim on the Company in a completed international project.
Defence Engineering segment received orders worth ₹1,341 crore during the quarter ended September 30, 2020 which mainly includes the contract for supply of Pinaka Weapon Launcher Systems, registering substantial growth over the corresponding quarter of the previous year on a low base.
The Order Book of the segment stood at ₹9,132 crore as on September 30, 2020, with 16% being international.
Defence Engineering segment recorded customer revenue of ₹765 crore registering a y-o-y decline of 20% over the corresponding quarter of the previous year due to tapering execution of a key gun order in the current year while the new orders are yet to gather execution momentum. International Revenue constituted 26% of the total customer revenue of the segment during the quarter.
The EBITDA margin of the segment at 24.4% was higher for the quarter ended September 30, 2020 as compared to the corresponding quarter of the previous year at 18.1%, reflecting the phase of jobs under execution coupled with realisation of claims in some domestic jobs and gains from operational efficiencies.
The Military communication business of Defence Engineering Segment has been transferred with effect from April 1, 2020 to Smart World and Communication business and reclassified to "Others Segment". Accordingly, previous year figures are regrouped wherever necessary.
With relatively subdued tendering activity in an uncertain oil price scenario, Hydrocarbon segment recorded muted Order Inflows during the quarter ended September 30, 2020.
The Order Book of the segment stood at ₹37,780 crore as at September 30, 2020, with the international Order Book constituting 49% of the total Order Book.
Hydrocarbon segment clocked Customer Revenues of ₹4,044 crore during the quarter ended September 30, 2020, registering y-o-y decline of 6%. However, sequentially it increased by 32%, with most sites nearing normalcy. International Revenue constituted 53% of the total customer revenue of the segment during the quarter from jobs executed in Africa, Saudi and Kuwait.
The EBITDA margin of the segment at 8.5% was lower for the quarter ended September 30, 2020 as compared to the corresponding quarter of the previous year at 12.5% mainly on account of prudential provisioning for time extension related cost in some domestic projects, as against previous year which included receipt of some favourable variation claims.
The Segment comprises of L&T Infotech group, L&T Technology Services group and Mindtree Limited
IT & Technology Services segment achieved Customer Revenue of ₹6,167 crore during the quarter ended September 30, 2020, registering a growth of 5%. The growth was led by L&T Infotech Group. International sales constituted 93% of the total customer revenue of the segment for the quarter ended September 30, 2020.
The EBITDA Margin for IT&TS segment increased to 23.2% for the quarter ended September 30, 2020 as compared to 19.5% of the corresponding quarter of the previous year, mainly due to improved manpower utilisation and lower operational cost.
Financial Services segment recorded Customer Revenue of ₹3,342 crore during the quarter ended September 30, 2020, a y-o-y decline of 3% due to lower disbursements vis-à-vis corresponding quarter of the previous year. The Loan Book was marginally lower at ₹98,823 crore as compared with September'19 at ₹100,258 crore.
The operating margin of the financial services segment for the quarter ended September 30, 2020 was at 10.6%, lower as compared to 22.5% of the corresponding quarter of the previous year, reflecting higher credit cost due to increased macro prudential provisions, coupled with lower fee income.
Developmental Projects Segment registered Customer Revenue of ₹1,140 crore during the quarter ended September 30, 2020, a decline of 22% over the corresponding quarter of the previous year largely due to suspension of Metro services at Hyderabad due to Covid lockdown. Nabha Power project, however, witnessed pick up in offtake with PLF reaching 92%.
The EBITDA Margin of the segment for the quarter ended September 30, 2020 declined to 5.3% as compared to 10.2% during the corresponding quarter of the previous year.
Performance of the segment was impacted on account of shutdown of Metro services for major part of the year, which restarted the operations from September 7th, 2020 in a staggered manner.
"Others" segment comprises Smart World and Communication, Realty business, Construction & Mining Machinery, Rubber Processing Machinery and Valves business.
Customer Revenue of "Others" segment during the quarter ended September 30, 2020 at ₹1,321 crore registered a decline of 33% over the corresponding quarter of the previous year. The decline was mainly in Realty business, which in the previous year included monetisation of a commercial asset in Seawoods project, Navi Mumbai and higher handing over of completed residential property.
International sales constituted 16% of the total customer revenue of the segment during the quarter, mainly pertaining to Valves business.
During the quarter ended September 30, 2020, the segment EBITDA margin stood at 18.0%, which is lower as compared to 18.3% margin in the corresponding quarter of the previous year. Margin continues to be healthy on account of tight cost monitoring and operational efficiencies across businesses.
In the quarter under review, the Indian economy saw early signs of revival from the sharp economic contraction triggered by the pandemic. A few macroeconomic and industry variables viz. Manufacturing PMI, Capital Goods IIP, Goods and service tax collections, etc have recovered when compared to Q1 FY 2020-21 lows, while some other indicators such as power demand, exports and housing loan disbursements are moving close to pre-covid levels. Some important consumption indicators are also seeing signs of approaching normalcy aided by strong rural demand, though part of the services sectors such as travel and hospitality are yet to recover from the impact of the pandemic. Several fiscal and monetary incentives announced by the Government and the RBI in the form of liquidity boost and credit support are giving the much-needed impetus to drive the economic recovery.
Strong emphasis by the Government on infrastructure spending augurs well for the Company and the National Infrastructure Pipeline which lays out a detailed capex roadmap till 2025 provides visibility on the domestic infrastructure outlook. Sectors such as Water, Power T&D, Metro/RRTS, Railways, Roads and Expressways are witnessing increased traction as far as bidding / tendering activity is concerned. The Atmanirbhar Bharat program of Government is also expected to incentivise domestic investments particularly in areas like defence procurement.
If the current moderation in new Covid cases is sustained, and with increased efforts for launch of effective vaccines, recovery could gather pace and yield a possible GDP upgrade over the next year or two.
On the global front, the outlook on economic recovery remains uncertain with resurgence of Covid in parts of Europe, US policy directions dependent on outcome of Presidential elections and protectionist policies being adopted by various countries within an increasingly bipolar world order. Oil prices remain depressed and has led to a sharp contraction in global Hydrocarbon capex. In Africa and Middle East regions, social spending continues in the Water and Power Transmission & Distribution space.
Against this backdrop, the Company has carefully planned the conservation of its resources with a calibrated approach and strategy to navigate the dynamic business environment. The Company continues to focus on profitable execution of its large Order Book, improve its operational efficiencies, unlock capital, maintain liquidity focus and exercise strong cost control measures, all with the overarching aim of superior value creation for the stakeholders.
Larsen & Toubro is an Indian multinational engaged in technology, engineering, construction, manufacturing and financial services with over USD 21 billion in revenue. It operates in over 30 countries worldwide. A strong, customer-focused approach and the constant quest for top-class quality have enabled L&T to attain and sustain leadership in its major lines of business for eight decades.