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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

L&T order book shows healthy signs

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.”

(This story appears in the 16 August, 2019 issue of Forbes India. To visit our Archives, click here.)

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