L&T order book shows healthy signs

But private sector industry capex concerns remain

Salil Panchal
Published: Jul 30, 2019 11:02:28 AM IST
Updated: Jul 30, 2019 11:06:33 AM IST

Life is not a template and neither is mine. Like several who have worked as journalists, I am a generalist in my over two decade experience across print, global news wires and dotcom firms. But there has been one underlying theme in each phase; life gave me the chance to observe and tell a story -- from early days tracking a securities scam to terror attacks and some of India's most significant court trials. Besides writing, I have jumped fences to become an entrepreneur, as an investment advisor -- and also taught the finer aspects of business journalism to young minds. At Forbes India, I also keep an eye on some of its proprietary specials like the Rich list, GenNext and Celebrity lists. An alumnus of Xavier Institute of Communications and H.R College of Commerce and Economics in Mumbai, I have worked for organisations such as Agence France-Presse, Business Standard, The Financial Express and The Times of India prior to this.

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The International Monetary Fund in July lowered India’s growth forecast to 7 percent for 2019. However, data from Larsen &Toubro’s (L&T) Q1FY20 earnings seems to suggest there are green shoots of recovery on the horizon. L&T’s domestic business (about 79 percent) continues to dominate the order book while the rest is international business.

Domestic engineering and construction (E&C) business—which excludes Infotech and financial services operations—has seen a 19 percent increase in year-on-year revenues in the June-ended quarter, driven by 27 percent growth in the infrastructure segment. Total order inflows (new orders) have grown by 11 percent in Q1FY20, to ₹38,700 crore. Half of these are from the private sector.

“This is a strong showing considering the election period and an economic slowdown,” says an analyst with Motilal Oswal Financial Services. SN Subrahmanyan, L&T’s CEO and managing director, says orders from the centre and state governments are likely to pick up.

Some of the key projects secured by L&T include an order from the Gujarat Water Infrastructure for MS pipeline from Brahmani Dam-2 to Chakampar village (Package II), including its operation and maintenance for five years.

While this spells good news, the broader malaise—of poor private sector capex—is yet to ease. L&T’s chief financial officer R Shankar says: “Corporates will think 10 times before they commit their capital for putting up a facility as part of a project. We could thus see at least another 12-18 months of subdued private sector industrial capex.”

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(This story appears in the 16 August, 2019 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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