SN Subrahmanyan, MD & CEO of Larsen & Toubro (L&T) said we are still 70 percent engineering, procurement and construction (EPC) company and in the first 9 months, we have got 11 percent orders, 10 percent of sales and 16 percent in profit after tax.

The engineering giant Larsen & Toubro (L&T) on Wednesday reported a 15.2 percent year-on-year (YoY) jump in consolidated net profit at Rs 2,352.1 crore for the third quarter ended December 31. The company recorded consolidated gross revenue of Rs 36,243 crore from continuing operations for the quarter ended December 31, 2019, achieving YoY growth of 6 percent. The international revenue during the quarter at Rs 12,871 crore constituted 36 percent of the total revenue.

“Quarter wise there was an issue because in some quarters big orders get deferred or don’t get settled and therefore we always say for a predominantly EPC organizations results are best not looked at on quarterly basis,” Subrahmanyan added.

He further said that project inflow profile has changed over quarters. “Earlier, to a large extent, civil construction orders but today it’s more of hydrocarbon, water, power utilities kind of orders. Therefore, there is a change in profile of orders that we get and that is what makes us look different because you expect those big civil projects like roads, bridges, buildings to come in, which is not there to that speed at the moment. Whereas the kind of projects that we get from hydrocarbon, water and power transmission makes you feel confident that as we go forward we seem to be achieving what we need to achieve, which is our guidance for the year,” added Subrahmanyan.

When asked if there an increased investments from the private players, he mentioned, “We have not seen those in EPC and project kind of businesses except one or two. However, one has seen some boom in the airport construction. We have seen some amount of industrial activity, especially in steel and some kind of movement in zinc and alumina. Therefore, it is still early days from a private sector point of view and one has to take it as it comes. So, there is still quite a bit of reliance on government funded projects. ”

When asked if working capital stress was still there in the system, he said, “It is still a strain, let me not make any justification for it. Getting payments from central government and state government jobs is still not easy. So, therefore you tend to concentrate on jobs which have better cash flows and international jobs, which have better fund flows.” However, luckily for L&T, 35-40 percent of orders come from international, he added.

Speaking about his expectations from the policymakers in budget 2020, he said, “What is required is to put more money in the hands of the people. In my view, if consumption increases, the spend increases, and spend generates momentum to create other opportunities. What is lacking today is economic powers into the hands of the people to spend more, to create more consumption.”

When asked if Q3 would be the last quarter of EPC revenue decline and if they were turning the corner, he replied, “The construction part of L&T has not had a revenue decline since 2013-2014 in any quarter. This particular season, these nine months, we had the pollution matter in Delhi because of which all the jobs in Delhi were stopped for 60 days. Due to the review of projects in Andhra Pradesh, we had a stoppage of jobs there. Then in Mumbai, due to technical matters, two of the major projects that we had did not go forward. All these matters have got cleared clear now. So we are now pushing ourselves to see the best quarter. We are confident of achieving what we guided.”

First Published:Jan 23, 2020 2:36 PM IST