Growth achieved by Larsen & Toubro in a challenging year

0
71

Larsen & Toubro recorded Consolidated Gross Revenue of ₹ 145,452 crore from continuing operations for the year ended March 31, 2020, achieving y-o-y growth of 8%. The International revenue during the year at ₹ 48,467 crore constituted 33% of the total revenue. For the period January-March 2020, the Consolidated Gross revenue at ₹ 44,245 crore recorded a marginal y-o-y increase of 2%, despite challenges faced in a period characterised by economic volatility and a work-from-home / lockdown environment in the last fortnight of the financial year. Consolidated Profit After Tax (PAT) from continuing operations for the year ended March 31, 2020 at ₹ 8,894 crore registered growth of 7% y-o-y. The overall PAT at ₹ 9,549 crore, including the PAT from discontinued operations for the year ended March 31, 2020 grew by 7% y-o-y. For the quarter ended March 31, 2020, overall PAT including the PAT from discontinued operations at ₹ 3,197 crore registered decrease of 6% over the profits for similar period last year. During the quarter the Company declared interim dividend ₹ 10 per equity share. The Board of Directors has recommended a final dividend of ₹ 8 per equity share for the approval of shareholders. The Company bagged a spate of orders worth ₹ 186,356 crore at the group level during the year ended March 31, 2020, registering growth of 9% compared to the previous year even in the face of subdued business environment and economic challenges. International orders during the year at ₹ 60,094 crore increased to 32% of the total order inflow, on large value order wins in diverse sectors such as Power 2 Transmission & Distribution, Hydrocarbon, Water Effluent Treatment and Metallurgical and Material Handling business. The Order inflow for the quarter ended March 31, 2020 stood at ₹ 57,785 crore, registering a growth of 5% over the corresponding period of the previous year, with significant orders received in Infrastructure segment. The Consolidated Order Book of the group stood at ₹ 303,857 crore as at March 31, 2020, registering a growth of 4% over March, 2019. International orders constitute 25% of the total Order Book.

Infrastructure Segment Infrastructure Segment secured orders of ₹ 102,678 crore, during the year ended March 31, 2020, registering growth of 7% compared to previous year. Order wins were in varied areas of Health sector, Affordable Mass Housing, Power Transmission & Distribution business, renewable energy, airport, Industrial water systems, Water Supply and Distribution, Hydel project, Network management system, gold beneficiation plant and a Railway Freight facility package. International orders at ₹ 29,509 crore constituted 29% of the total order inflow of the segment during the year, with noteworthy order wins in Africa and Middle East. During the quarter January-March 2020, the Segment recorded order inflow of ₹ 41,396 crore, registering a growth of 33% over the corresponding quarter of the previous year. The Order Book of the Segment stood at ₹ 224,467 crore as at March 31, 2020, with the international order book constituting 21% of the total order book. Infrastructure Segment recorded Customer Revenue of ₹ 73,037 crore for the year ended March 31, 2020 registering a near flat growth. Execution challenges adversely affecting revenue accretion were faced on multiple counts during FY 2019-20, viz., halt of work in multiple projects across Andhra Pradesh on State Government directions to review all projects ordered by the previous Government, stoppage of all construction work in the NCR region by the Supreme Court during winter season for environmental reasons, work stoppage due to public interest litigations in some of the large projects , lower fund allocation in some states and execution challenges in the last few weeks of the year on account of the pandemic. International revenue constituted 25% of the total customer revenue of the segment during the year. For the quarter January-March 2020, the Customer Revenue was at ₹ 25,332 crore, recording y-o-y decline of 6%, primarily due to slowdown caused by Covid-19 environment. The EBITDA margin of the segment during the year ended March 31, 2020 was at 8.1% vis-à-vis 8.5% recorded in previous year, with slowdown in revenue scale up, cost 3 pressures encountered in a few projects and the adverse impact caused by COVID 19 led slowdown/lockdown in March 2020.

Power Segment

Power Segment secured orders of ₹ 12,048 crore for the year ended March 31, 2020 registering significant growth on receipt of large domestic order for a 2X660 MW Ultra Supercritical thermal power project, multiple Flue Gas Desulphurisation (FGD) orders and an order for a comprehensive boiler island package in L&T–MHPS Boiler JV, consolidated for L&T share. International orders constituted 2% of the total order inflow of the segment during the year. The segment recorded order inflow of ₹ 218 crore for the quarter ended March 31, 2020, mainly comprising of order amendments. The Order Book of the Segment grew to ₹ 15,849 crore as at March 31, 2020, with receipt of a major thermal power plant order and a slew of FGD orders during the year. The international order book constitutes 7% of the total order book. Power Segment recorded customer revenue of ₹ 2,294 crore during the year ended March 31, 2020, registering a y-o-y decrease of 42% with new awards yet to pick up execution momentum. International revenue constituted 17% of the total customer revenue of the segment during the year. For the quarter January-March 2020, the Customer Revenue was at ₹ 555 crore, recording y-o-y decline of 40%. The segment EBITDA margin for the year ended March 31, 2020 was at 12.0%, higher as compared to 4.5% recorded in previous year on receipt of favourable arbitration award.

Heavy Engineering Segment Heavy Engineering Segment secured orders valued at ₹ 2,361 crore during the year ended March 31, 2020 representing a decline of 42% y-o-y mainly due to deferment of orders and on a high base of Order Inflows in FY19 which included a significant quantum of international orders from the Refinery, Cracker, Oil & Gas sector. International orders constituted 57% of the total order inflow of the segment during the year. For the quarter January-March 2020, the Segment recorded order inflow of ₹ 996 crore recording y-o-y growth of 26%. The Order Book of the Segment stood at ₹ 4,121 crore as at March 31, 2020, with 52% being international. The Segment recorded Customer Revenue of ₹ 2,853 crore registering a y-o-y growth of 31% over the previous year on the back of improved order book coupled with good execution progress in refinery, oil and gas equipment business. International sales constituted 50% of the total customer revenue of the segment. The Customer 4 Revenue during the quarter January-March 2020 stood at ₹ 637 crore recording a y-o-y decline of 17%. The EBITDA margin of the segment at 21.5% for the year ended March 31, 2020 registered decline over the previous year at 24.5%, on account of prudential provisions made for arbitration outcomes.

Defence Engineering Segment L&T Shipbuilding Limited a 100% subsidiary under the Defence Engineering segment, has now been merged with parent Larsen & Toubro Limited after obtaining NCLT approval. With the effective date of 1 st April 2019, the financials of L&T are considering the merger impact and accordingly, the previous year figures have been regrouped. This, however, does not have any impact on the group financials. Defence Engineering Segment received orders of ₹ 2,233 crore during the year ended March 31, 2020, representing a decline of 26% over the previous year with deferment of awards from Ministry of Defence. International orders constituted 21% of the total order inflow of the segment. During the quarter January-March 2020, the Segment recorded order inflow of ₹ 1,049 crore recording a y-o-y decline of 10%. The Order Book of the Segment stood at ₹ 9,216 crore as on March 31, 2020, with the international order book constituting 19% of the total Order book. Defence Engineering Segment recorded customer revenue of ₹ 3,970 crore registering a y-o-y growth of 6% over the previous year led by noteworthy progress in execution of a marquee order for tracked artillery guns. International Revenue constituted 9% of the total customer revenue of the segment. The customer revenue during the quarter January-March 2020 stood at ₹ 925 crore recording a y-o-y decline of 15%. The EBITDA margin of the segment at 18.2% was higher for the year ended March 31, 2020 as compared to the previous year at 16.2%, mainly with operational efficiencies contributing to improvement.

 Hydrocarbon Segment

Hydrocarbon Segment secured orders valued ₹ 20,964 crore during the year ended March 31, 2020, a decline of 25% compared to previous year, with deferment of orders mainly in Onshore vertical. International order inflow constituted 36% of the total order inflow of the segment. The order inflow for the quarter January-March 2020 stood at ₹ 2,517 crore recording a y-o-y decline of 80% as previous year included a mega international order in Onshore vertical. 5 The Order Book of the Segment stood at ₹ 44,130 crore as at March 31, 2020, with the international order book constituting 48% of the total. Hydrocarbon Segment recorded Customer Revenue of ₹ 17,420 crore during the year ended March 31, 2020, registering a robust y-o-y growth of 15% on back of strong execution momentum in Onshore vertical. International Revenue constituted 43% of the total customer revenue of the segment for the year ended March 31, 2020. The Customer Revenue during the quarter January-March 2020 stood at ₹ 4,969 crore recording a y-o-y growth of 15%. The segment recorded improvement in the EBITDA Margin to 10.9% for the year ended March 31, 2020 as compared to the previous year at 8.8%, on back of execution efficiencies and claim settlement in few projects.

IT & Technology Services (IT&TS) Segment

Due to consolidation of Mindtree limited from second quarter of FY 2019-20, the resultant figures for the current periods are not comparable with the previous periods on a like-to-like basis. IT & Technology Services Segment achieved Customer Revenue of ₹ 22,135 crore during the year ended March 31, 2020 including Mindtree revenue consolidation of ₹ 5,915 crore. International sales constituted 92% of the total customer revenue of the segment for the year ended March 31, 2020. The Customer Revenue during the quarter January-March 2020 stood at ₹ 6,350 crore (including Mindtree revenue of ₹ 2,035 crore), recording a y-o-y growth of 68%. An array of business verticals has contributed to the strong growth (Manufacturing, CPG, Retail & Pharma and Energy & Utilities in L&T Infotech Group, Transportation, Medical devices and Plant Engineering verticals in L&T Technology Services Group and Hi-Tech & Media and Travel & Hospitality in Mindtree Limited). Businesses within this segment have smoothly transitioned to a work-from-home environment during the pandemic with encouragement and support from customers. The EBITDA Margin for IT&TS Segment declined to 20.9% for the year ended March 31, 2020 as compared to the previous year at 23.2%, mainly due to multiple cost pressures including higher on-shoring costs, increased visa charges and investment in new competencies. Financial Services Segment

Financial Services Segment recorded Customer Revenue of ₹ 13,822 crore during the year ended March 31, 2020, registering a y-o-y growth of 9%, driven by growth in loan assets of ‘focussed’ business lines. 6 The Loan Book at ₹ 98,384 crore was marginally lower as compared with March ’19 at ₹ 99,121 crore in a volatile and tight liquidity environment. The operating margin of the financial services segment for the year ended March 31, 2020 was lower at 19.9% as compared to the previous year at 24.5% on account of higher credit cost due to additional prudential provisions and Covid-19 related provisions as per RBI guidelines.

Developmental Projects Segment

During the year, shareholding in L&T Infrastructure Development Projects Ltd (L&T IDPL) has been diluted to 51% on the partner Canadian Pension Plan Investment Board getting statutory approval for conversion of Compulsorily Convertible Preference Shares (CCPS) into Equity under a negotiated agreement. The balance stretch of Hyderabad Metro was commissioned during the quarter, with which now the Metro Rail project is fully commissioned. Developmental Projects Segment registered Customer Revenue of ₹ 4,850 crore during the year ended March 31, 2020, recording a decline of 4% over the previous year, on account of lower offtake from Nabha power plant by the state of Punjab and a planned shutdown of one unit for overhaul and repairs in Q4 FY 2019-20. The EBITDA Margin of the Segment for the year ended March 31, 2020 improved to 11.1% as compared to 10.3% during the previous year on account of full commissioning of Hyderabad metro and improved profits from Nabha power plant. “Others” Segment

“Others” segment comprises Realty, Construction & Mining Machinery, Rubber Processing Machinery and Valves businesses. Customer Revenue of “Others” Segment during the year ended March 31, 2020 at ₹ 5,070 crore registered a decline of 11% over the previous year, as previous year included revenue from a large value transaction pertaining to the sale of commercial property and higher hand over of residential property in Realty business. International sales constituted 11% of the total customer revenue of the segment. During the year ended March 31, 2020, the segment EBITDA margin stood at 20.9%, lower as compared to 28.6% margin in the previous year, mainly on account of gain on sale of a commercial property in the previous year.

 Electrical & Automation Segment (Discontinued Operations) Electrical & Automation Segment, subsequent to receipt of approval from Competition Commission of India and subject to fulfilment of certain conditions, has been classified as ‘Discontinued Operations’ from June 2019. Fulfilment of various pre-conditions are under way and the sale transaction with Schneider Electric is expected to conclude in FY 2020-21. The segment clocked Customer Revenue of ₹ 5,232 crore during the year ended March 31, 2020 registering a decline of 10% y-o-y due to reduced industrial offtake. International Revenue constituted 25% of the total customer revenue of the segment for the year ended March 31, 2020. The Customer Revenue during the quarter January-March 2020 stood at ₹ 1,121 crore recording a y-o-y decline of 31% representing sluggish demand and disrupted supplies in March 20. The segment recorded EBITDA Margin of 17.9% for the year ended March 31, 2020 almost in line with previous year.

Outlook

 The Indian economy has been struck by the coronavirus pandemic at a time when some green shoots of economic recovery were being forecasted after a prolonged bout of growth slowdown. The lockdown imposed towards the end of FY 2019-20, in an attempt to prevent community transmission of the virus, has unfortunately led to both demand and supply shocks to the economy. Even though the Government has announced a wide ranging raft of stimulus measures designed to alleviate stress in various sectors, it is likely that economic growth will still take a few quarters more to revive to healthy levels. On the global front, oil prices remain soft in a scenario of demand-supply realignments and geopolitical developments leading to fiscal imbalances in oil producing countries. The US-China trade spat also appears to be escalating and spreading to other countries in bipolar fashion, leading to uncertainty in economic activity in different geographies. Against this backdrop of domestic challenges and global volatility and the uncertainty about timelines by which normalcy will be restored, the Company has taken a number of measures designed to weather the economic crisis. These measures include building sufficient liquidity on the Balance Sheet, adapting business models to incorporate work-at-home practices wherever feasible, optimising digital initiatives to facilitate site execution, engaging with customers to refresh contractual rights and obligations, sharply focusing on all items of costs to maximise economic benefits, taking care of the large sub-contracted labour force at work sites, complying with all Governmental directives while working to remobilise the workforce to commence execution of projects and strengthening practices to ensure that staff are safe and well during this period. While the initial quarters of FY 2020-21 are expected to be adversely affected by the current upheaval, we 8 expect growth revival in the later part of the financial year assuming things get better from here.

LEAVE A REPLY

Please enter your comment!
Please enter your name here