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Published: June 15, 2024
Updated: June 15, 2024

Larsen & Toubro

Revenues to rise 15% in FY25

Larsen & Toubro, the engineering colossus which attracted group order inflows of Rs 3,02,812 crore in fiscal 2024, suggesting a 31 per cent spurt over that in fiscal 2023, is expecting a growth of 10 per cent in order inflows during fiscal year 2025.

The infra segment order book stood at the end of March 2024 at Rs 311,665 crore (international orders 27%, domestic 73%) and the book to bill is around 3 years. Infra order intake in Q4FY24 was Rs 31,340 crore (down 24% yoy). The lower infra order intake during the quarter was largely due to the receipt of some high-value orders in the previous year. International orders constituted 22% of the total order inflow for the quarter.

HUGE PROSPECTS

As regards the prospects pipeline, he stated that aggregate prospects at the end of March 31, 2024 stood at Rs 12.1 trillion vs Rs 9.7 trillion at that same time last year, translating into a growth of 24% yoy. The increase was largely due to infra and hydrocarbon. The infra prospects pipeline was Rs 7.25 trn vs. Rs 6.5 trn last year, HC was Rs 3.87 trn vs Rs 2.44 trn last year, Power Rs 0.5 trn vs Rs 0.5 trn, Hitech mfg Rs 0.35 trn vs Rs 0.25 trn last year, and Green energy Rs 0.12 trn vs Rs 0.02 trn.

The infra prospects pipeline was up 11% to 7.25 trillion, of which domestic was Rs 5.39 trn and balance Rs 1.86 trn was international. Of the infra prospects pipeline, about 21% is water, 21% power T&D, 20% transportation, 20% B&F, 14% heavy civil infra, and 7% mineral and metals.

Referring to the future outlook, Mr Ramakrishnan said that “we expect a growth of 10% in order inflow for FY25. Expect softness in order awarding/finalization in H1FY25 due to elections in the domestic market. On the revenue front, we expect a growth of 15% over FY24, given a large order book on hand. Expect execution to carry on at a good clip. On the projects and manufacturing portfolio, the margin will be at around 8.25%, the same as in FY24. For FY25, net working capital to revenue is expected at 15%.

Speaking about the margin guidance for FY25, he stated that considering the impact of the following factors — order mix in terms of domestic and international (international comes with a lower margin but with better WC terms); infra order mix (over recent years the company bagged large renewable orders which are of lower embedded margins); EPC business risk, including competitive bidding and time delays; delays in claim settlements; investment in capability and resources that will have a shorter impact on margins, even though it will be beneficial in the long term.

MASSIVE ORDERS

The order book as of March 31, 2024 stood at Rs 4.6 trillion, up 20% yoy, of which 62% was domestic and the balance 38% was international. Of the 38% international, 92% was Middle East, 2% Africa and the balance 6 % from other geographies. Of the total order book, around 19% is funded by multilateral funding institutions.

Of the domestic order book of Rs 2.95 trillion, Central government orders were 14%, state governments 28%, PSUs (of state governments) 36% and private sector 22%. Of the total order book, slow moving orders are well below 1%.

GCC capex is on the upswing in the energy and HC sectors, Mr Ramakrishnan said, adding, “Expect prioritization of investment to happen in GCC countries.”

There may be some decline in international order inflows (due to the US elections and US policy on the Middle East), which would be compensated by domestic order inflows, he said.

The company has completed 3 years of its current strategic plan.”In five years of the strategic plan, the target group order inflow is Rs 3.4 trillion at a CAGR of 14% in 5 years. The order book target is a CAGR growth of 15%. The group RoE target is 18%. OI and OB in the first 3 years achieved a CAGR of 20% and 18%,” he said.