Equities
L&T projects 10% order growth due to election disruptions, with a strategic pivot towards international expansion amid challenges.
By Mackenzie Crow
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Larsen & Toubro Ltd. (L&T), India's premier engineering firm, anticipates a deceleration in order growth for the fiscal year ending March 2025, attributed to the forthcoming federal elections in India. The company projects a growth rate of 10% in fiscal 2025, a decrease from the 20% growth experienced in the previous year. Shankar Raman, L&T's Chief Financial Officer, highlighted the expected disruption in domestic order flow as the new government settles in, suggesting a potential for a shortened fiscal year of effective operations. This forecast is particularly significant given L&T's reliance on government contracts, which constitute a substantial portion of its revenue.
L&T reported a net income growth of 10% to 43.96 billion rupees for the January-to-March quarter, surpassing analyst expectations. This performance marks the highest quarterly profit for the company since at least 2020. Despite challenges, L&T's order book remained robust at 4.76 trillion rupees at the end of March 2024, with international orders comprising 38%, up from 28% a year ago. The company's strategic shift towards expanding its international presence aims to mitigate the reliance on domestic and government orders. For fiscal 2025, L&T forecasts a revenue growth of 15% and an Ebitda margin forecast of 8.25%.
L&T's efforts to diversify its order book have led to an increased focus on international markets, particularly the Middle East. However, new international orders saw a 30% decline to 252 billion rupees during the quarter, as clients in the Middle East reviewed some projects amidst ongoing conflict. Despite this setback, CFO Shankar Raman remains optimistic about the resumption of order momentum in the second half of the year, indicating that the weakness in Middle East orders is not expected to be a sustained trend.
"We have to factor for disruption in domestic order flow as the new government settles down... We could be looking at another 9-month year." "Weakness in Middle East orders is not expected to sustain. Overall order momentum should resume in the second half of the year."
Finance GPT
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