MUMBAI : Engineering and construction conglomerate Larsen and Toubro (L&T) reported net profit of ₹1473 crore, growing 21.2% year-on-year, and with operating margins improving by 100 basis points in the June 2019 quarter. A Bloomberg poll of 14 analysts had estimated net profit of ₹1560.3 crore for the quarter.

The company reported consolidated revenue of ₹29,636 crore, rising 10% year-on-year from ₹27,005 crore in the year-ago period. L&T won new orders of ₹38,700 crore during the quarter, registering a growth of 11% year-on-year. International orders account for 23% of order inflow. With the infrastructure and power segments accounting for the bulk of new orders, the consolidated order book stands at ₹2.94 trillion as of June 30. Consolidated margins for the quarter improved to 11.2% from 10.2% in the year-ago period.

The company's management, however, has cautioned about private investment in infrastructure taking another 12-18 months, with new government contracts also being thin on the ground. "In the first quarter, 50% of our orders came from the private sector, for building airports, campuses, data centres, and a large cement factory order. But do we see the industry adding capacity? No," said R Shankar Raman, CFO, L&T. "There's no capital raising in the public market, the debt market is in a shambles and banks are hesitating to take credit risks. We should expect subdued orders from the private sector in the next 12-18 months. Order inflow will also depend on how much money is available with the government to finance projects."

SN Subrahmanyan, MD and CEO, said: "There is some turbulence in the payment cycle, but we expect it will ease out in 2-3 months. We are also seeing a general tightening of the fist and on liquidity from the government's side."

Despite this, the company has maintained its FY20 guidance of 10-12% order book growth and 12-15% growth in revenues.

After the founders and CEO of Bengaluru-based IT firm Mindtree resigned and with L&T now holding 60.59% of the company, L&T said it will appoint the new CEO on August 2.

The infrastructure segment secured fresh orders of ₹17,497 crore, lower by 10%, with margins falling slightly to 6.4%. It recorded customer revenue of ₹13,865 crore, higher by 14% year-on-year. The power segment won orders of ₹6700 crore and recorded revenue of ₹561 crore, lower by 48% year-on-year because of a lower opening order book, the company said. The EBITDA margin for the quarter also stood at 3.3%, lower than 4.1% in the previous comparable period. The heavy engineering segment earned ₹874 crore in revenue, defence earned ₹965 crore while the hydrocarbon business earned ₹3763 crore, with orders falling 28% here to ₹3424 crore.

From its subsidiaries, L&T earned ₹3819 crore of customer revenue from IT and Technology Services arm, ₹3462 crore in financial services and another ₹1149 crore realty, construction and mining machinery and the products and valves business. The electrical and automation segment, which is pending sale to Schneider Electric, clocked customer revenue of ₹1359 crore. The company said it has received Competition Commission of India's approval and the sale will be completed in the next 1 year.

With the Bombay High Court halting work on the city's ambitious Coastal Road Project for want of adequate environment clearances, L&T as the contractor will has taken the setback in stride. "The government has been asked to regularise approvals, we remain optimistic about it," SN Subrahmanyan, MD and CEO, said. He also highlighted the new Andhra Pradesh government's approach to review past project contracts and the disruption it causes in operations. "We have some residential projects in AP under review. All projects which haven't achieved 25% billing in the state are under review.".

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