L&T Outshines With Robust Quarter Performance : Order Inflow Up By 57%, Revenue Up By34%

Larsen & Toubro achieved Consolidated Revenues of ₹ 47,882 crore for the quarter ended June 30, 2023 recording a y-o-y growth of 34%, primarily aided by execution of a healthy opening order book in its Projects and Manufacturing portfolio. International revenues during the quarter at ₹ 19,022 crore constituted 40% of the total revenue.

The Company for the quarter ended June 30, 2023, posted a total Consolidated Profit After Tax (PAT) of ₹ 2,493 crore, registering a high growth of 46% compared to the corresponding quarter of the previous year.

The Company received orders worth ₹ 65,520 crore at the group level during the quarter ended June 30, 2023, registering a strong y-o-y growth of 57%. During the quarter, orders were received across diverse segments like Rail, Renewables, Rural Water Supply, Transmission & Distribution, IT & Office Space and Onshore & Offshore verticals of the Hydrocarbon business. International orders at ₹ 27,646 crore during the quarter comprised 42% of the total order inflow.

The consolidated order book of the group is at ₹ 412,648 crore as on June 30, 2023, with international orders having a share of 29%.

The Board of Directors has approved a proposal to buy-back through the tender offer route equity shares of the Company for an aggregate amount not exceeding ₹ 10,000 crore (excluding tax on buy-back). The proposal is subject to the approval of shareholders. Further, the Board of Directors has also approved a special dividend of ₹ 6 per equity share.

These proposals underline the confidence of the Company in achieving its growth plans and endorses the financial strength.

Infrastructure Projects Segment

The Infrastructure Projects segment secured order inflow of ₹ 40,051 crore, during the quarter ended June 30, 2023, registering a significant growth of more than 100% y-o-y on receipt of a healthy mix of large value orders across sub-segments. International orders at

₹ 13,872 crore constituted 35% of the total order inflow of the segment during the quarter.

The segment order book stood at ₹ 301,159 crore as on June 30, 2023, with the share of international orders at 24%.

The segment posted customer revenues of ₹ 22,058 crore during the quarter ended June 30, 2023, registered a healthy y-o-y growth of 56% led by improved execution momentum witnessed across various projects. International revenue constituted 23% of the total customer revenue of the segment during the quarter.

The EBITDA margin of the segment during the quarter ended June 30, 2023 was at 5.1% vis-à-vis 6.5% recorded in the corresponding quarter of the previous year. Margin for the quarter is a function of job mix with legacy jobs nearing completion and reflects the uneven accrual of margin across quarters given the inherent nature of projects business.

Energy Projects Segment

The Energy Projects segment secured orders valued at ₹ 7,245 crore during the quarter ended June 30, 2023, registering a substantial growth of 66% y-o-y with receipt of orders in the Onshore and Offshore vertical of Hydrocarbon business. International order inflow constituted 40% of the total order inflow of the segment during the quarter.

The segment order book was at ₹ 72,870 crore as on June 30, 2023, with the international order book constituting 62%.

The segment achieved customer revenues of ₹ 6,682 crore during the quarter ended June 30, 2023, recording growth of 32% over the corresponding quarter of the previous year mainly due to execution ramp up in international projects in the Hydrocarbon business. International revenues had a share of 49% of the total customer revenues for the quarter.

The EBITDA margin of the segment at 9.1% for the quarter ended June 30, 2023 improved compared to 8.5% over the corresponding quarter of the previous year, mainly reflective of job mix and stage of execution.

Hi-Tech Manufacturing Segment

The Hi-Tech Manufacturing segment secured orders valued at ₹ 1,051 crore during the quarter ended June 30, 2023 registering a decline of 70% over the corresponding quarter of the previous year, largely due to relatively higher base effect of the previous year led by order wins in Defence Engineering business. Export orders constituted 50% of the total order inflow of the segment during the quarter.

The order book of the segment was at ₹ 25,630 crore as on June 30, 2023, with the share of export orders at 12%.

The segment posted customer revenues of ₹ 1,781 crore for the quarter ended June 30, 2023, registering growth of 40% over the corresponding quarter of the previous year, with execution momentum derived from the opening order book. Export sales comprised 37% of the total customer revenues for the quarter.

The EBITDA margin of the segment at 16.8% for the quarter ended June 30, 2023 registered growth, compared to 15.1% reported in the corresponding quarter of the previous year, mainly on account of execution cost savings and improved realisations.

IT & Technology Services (IT&TS) Segment

The segment recorded customer revenues of ₹ 10,851 crore for the quarter ended June 30, 2023, registering y-o-y growth of 14% and reflecting growth impetus in the IT&TS sector. International billing contributed 92% of the total customer revenues of the segment for the quartear ended June 30, 2023. The aggregate revenue of the two listed subsidiaries (LTIMindtree and L&T Technology Services Limited) in this segment at USD 1,339 Mn registered a healthy y-o-y growth of 8% in USD terms.

The EBITDA margin for the segment was at 20.6% for the quarter ended June 30, 2023 as compared to 21.9% in the corresponding quarter of the previous year. The segment margin was impacted mainly due to increased talent acquisition and retention costs.

Financial Services Segment

The segment reflects the performance of L&T Finance Holdings (LTFH), a listed subsidiary. The segment recorded income from operations at ₹ 3,020 crore during the quarter ended June 30, 2023, registering y-o-y growth of 2%, mainly attributed to higher disbursement in retail business, in line with its stated objective of retailisation of the loan book.

The total Loan Book is at ₹ 78,566 crore in June 23 vs ₹ 80,893 crore in March 23. This variation is due to planned phaseout of Wholesale loan book upon repayments and sell downs during the quarter. The Retail loan book now constitutes 82% of the total loan book as on June 30, 2023. Financial services business is poised to achieve its Lakhsya targets ahead of FY 2025-26.

The segment PBT for the quarter ended June 30, 2023 increased to ₹ 714 crore as compared to ₹ 356 crore in the corresponding quarter of the previous year due to lower provision of credit costs arising from improved asset quality and rising NIM+Fees of the retail portfolio.

Development Projects Segment

The segment recorded customer revenues of ₹ 1,294 crore during the quarter ended June 30, 2023.

The segment EBIT for the quarter ended June 30, 2023 registered a profit of ₹ 123 crore as compared to a loss of ₹ 21 crore during the corresponding quarter of the previous year, primarily due to consolidation of Nabha Power profits and improved Metro ridership.

“Others” Segment

“Others” segment comprises (a) Realty (b) Industrial Valves (c) Construction Equipment & Mining Machinery and (d) Rubber Processing Machinery.

Customer revenues during the quarter ended June 30, 2023 at ₹ 2,197 crore registered a substantial growth of 50% y-o-y, primarily on sale of commercial property and higher handover of residential flats in the Realty business. Export sales constituted 5% of the total customer revenues of the segment during the quarter, majorly relating to Industrial Valves and Rubber Processing Machinery businesses.

During the quarter ended June 30, 2023, the segment EBITDA margin at 18.6%, is in line with the corresponding quarter of the previous year.

Outlook

India’s real GDP growth of 7.2% in FY 2022-23 was amplified by strong capital formation. Further, domestic economic activity has remained resilient in Q1 FY 2023-24 as reflected by the buoyancy in various high frequency economic indicators. Purchasing managers’ indices (PMI) for manufacturing and services is also indicating sustained expansion. Disciplined fiscal stance by the Central Government and prudent monetary policy management by RBI has aided macro economic stability and has catapulted India into a league of fastest growing economies in the world.

Growth momentum is likely to continue on stable rabi crop production, expected normal monsoon, continued buoyancy in services and stable inflation with a softening bias. Further, given the healthy balance sheets of banks and corporates and declining uncertainty, conditions are favourable for the capex cycle to sustain the momentum. Higher government capex allocation in the green economy, including clean and renewable energy will provide the necessary impetus to investments in energy transition and larger infrastructure projects. Both the current account and the fiscal deficit are likely to remain within manageable levels in FY 2023-24.

On the global front, major economies are turning around the corner. Falling energy prices and headline inflation, easing supply bottlenecks and the reopening of China’s economy are some of the positive factors guiding the economy towards attaining the much needed growth. Major oil producing nations continue to invest on oil & gas, industrialization and energy transition initiatives, that will augur well for the Company’s Projects business.

In the backdrop of this mixed sentiment, the Company will continue its planned trajectory of profitable and return accretive growth. Focus will remain on cash generation and judicious capital allocation. The Company has a robust order prospects pipeline in the medium term and is confident of sustaining its growth momentum by utilizing the emerging opportunities, with an overarching aim of improving shareholder value on a sustainable basis.

Mr. S. N. Subrahmanyan, Chief Executive Officer & Managing Director, Larsen & Toubro

Mr. S. N. Subrahmanyan, Chief Executive Officer & Managing Director, Larsen & Toubro said “We closed the quarter with an all-round performance. Capex buoyancy in India & GCC (Gulf Cooperation Council) is providing the much-needed tailwinds for growing our “Projects & Manufacturing” portfolio, ably supported by the resilient performance of the “Services” businesses. The Q1FY24 performance is on the back of robust topline and bottom-line growth, supported by excellent balance sheet management, resulting in improved return ratios. We are walking the talk by returning surplus cash to shareholders in our journey to improve the Group return ratios over the Lakshya Strategic Plan period ending FY26. The group’s focus continues to be on cash generation, planned capital allocation and on enhancing shareholder’s wealth.”