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L&T Q2 Net Profit Falls 45% To Rs 1,410 Cr On COVID Impact

The company had clocked a net profit of Rs 2,551.67 crore in the year-ago period, it said in a regulatory filing.

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Engineering and construction giant Larsen & Toubro (L&T) on Wednesday posted a 45 per cent decline in consolidated net profit to Rs 1,410.29 crore for the quarter ended September, hit by the COVID-19 pandemic.

The company had clocked a net profit of Rs 2,551.67 crore in the year-ago period, it said in a regulatory filing.

'Net Profit After Tax (PAT) and share in profit / (loss) of joint ventures / associates from continuing operations before exceptional items for the quarter is at Rs 1,410 crore, registering a sequential improvement of nearly 4 times reflecting pickup in the business momentum.

'However, the impact of pandemic in terms of lower revenue, higher credit provisions in the Financial Services business and disruption of the Metro services, led to decline of 45 per cent vis-à-vis reported PAT of corresponding quarter of the previous year at Rs 2,552 crore,' the company said in a statement.

If the profit from an asset sale is taken into consideration, the company's consolidated net profit jumped to Rs 5,520 crore in the September quarter.

During the quarter, the company sold its electrical and automation (E&A) business to Schneider Electric of France for Rs 11,000 crore, making a net profit after tax Rs 8,101 crore, its Chief Financial Officer Shankar Raman told reporters during an earnings concall.

Total consolidated income fell to Rs 31,593.77 crore in July-September quarter, from Rs 35,924.89 crore in the year-ago period.

Total expenses slipped to Rs 29,455.57 crore as against Rs 32,622.14 crore earlier.

'During the quarter, with the labour at various project sites reaching near pre-COVID levels, the businesses saw a pickup in execution momentum compared to Q1 FY 2020-21 and achieved a sequential growth of 46 per cent.

'However, the revenue declined by 12 per cent y-o-y due to the lingering impact of the pandemic during the quarter under review,' the company said.

International revenue during the quarter at Rs 12,148 crore constituted 39 per cent of the total revenue, it said.

The company further said strong emphasis by the government on infrastructure spending augurs well for the company and the National Infrastructure Pipeline, which lays out a detailed capex roadmap till 2025, provides visibility on the domestic infrastructure outlook.

'If the current moderation in new COVID cases is sustained, and with increased efforts for launch of effective vaccines, recovery could gather pace and yield a possible GDP upgrade over the next year or two,' it noted.

The management that usually offers revenue guidance refused to do so this time, with Raman saying that offering a guidance is as difficult as forecasting when will the pandemic come to an end.

The company said cash generation from operations was robust during the quarter which was strongly supplemented by proceeds from the divestment of E&A business. It has declared a special dividend of Rs 18 per equity share to mark the successful completion of the divestment.

Defending the hefty Rs 18 dividend, Raman said after adjusting for impairment cost for the Hyderabad Metro and an Uttarakhand power plant which was commissioned, paying off some debt and also allocating for capital investments into group businesses, they are still left with around Rs 2,500 crore surplus from the sale of assets, which will be paid to shareholders as dividend.

He said the company has written off Rs 1,000 crore of the Rs 1,900 crore from a just commissioned power project in Uttarakhand as the project was delayed by over 10 years and the state refused to rework the PPA (Power Purchase Agreement).

Similarly, it made provisions for the loss-making Hyderabad Metro, he said, but did not specify how much.

During the quarter, with the labour at various project sites reaching near pre-lockdown levels, the businesses saw a pickup in execution momentum compared to Q1. Over 1.8 lakh labourers have resumed work, he added.

L&T bagged orders worth Rs 28,039 crore at the group level during the quarter, registering a decline of 42 per cent vis-a-vis the previous year, on account of deferment of award decisions largely caused by the pandemic, it said.

International orders during the quarter constituted 36 per cent of the total order inflow.

The consolidated order book of the group stood at Rs 2,98,856 crore as on September 30, 2020, with international order book constituting 24 per cent of the total order book.

Infrastructure segment secured orders of Rs 14,522 crore during the quarter, down by 7 per cent compared to the corresponding period of the previous year.

'Though ordering activity picked up compared to Q1 FY 2020-21, bid deferrals and loss of some select prospects impacted the order inflow,' it said.

The power segment recorded muted order inflows as the ordering activity continued to be lacklustre, with postponement of key tenders. The order book of the segment stood at Rs 14,695 crore as on September 30, 2020.

Heavy engineering segment secured orders of Rs 323 crore during the quarter, recording a decline of 53 per cent, due to deferment of orders in the nuclear and hydrocarbons space.

Defence engineering segment recorded customer revenue of Rs 765 crore, registering a y-o-y decline of 20 per cent, due to tapering execution of a key gun order in the current year while the new orders are yet to gather execution momentum, it said.

IT & Technology Services (IT&TS) segment, comprising L&T Infotech group, L&T Technology Services group and Mindtree Limited, achieved customer revenue of Rs 6,167 crore, up 5 per cent, it said, adding the growth was led by L&T Infotech.

The company said it continues to focus on profitable execution of its large order book, improve its operational efficiencies, unlock capital, maintain liquidity focus and exercise strong cost control measures, all with the overarching aim of superior value creation for the stakeholders.


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