L&T: Hit by lockdown

Engineering to infrastructure conglomerate Larsen & Toubro (L&T) reported 66% decline in profit before tax (PBT) in the April to June 2020 quarter (Q1), hurt by the lockdown.
L&T reported a PBT of Rs 894.46 crore for Q1FY21, down from Rs 2,655.23 crore in Q1FY20. An exceptional gain of Rs 224.72 crore thanks to divestment in its wealth management business, came as a shot in the arm.
L&T’s finance cost for the quarter nearly doubled to Rs 1,055.90 crore, from Rs 586.65 crore last year, due to the newly commissioned Hydera­bad Metro project, and higher borrowings taken with the intent to create a liquidity buffer.

Net profit of Rs 303.14 crore was 79% lower than Rs 1,472.58 crore last year, while revenue stood at Rs 21,259.97 crore, witnessing a dip of 28%.
Profit after tax was hit mainly due to lower revenue, credit provisions in the financial services business, and under recovery of overheads.
Based on available data, L&T’s quarterly net profit never dipped to Rs 303.14 crore between June 2013 and March 2020.
Most of the quarter saw the firm struggle due to labour shortage, and curtailment in factory and office operations because of the lockdown.

L&T booked orders worth Rs 23,574 crore — a 39% drop from the Rs 38,700 crore in Q1FY20. The decline in new orders was caused by low interest towards fresh investment and deferment in award decisions.
Of the new orders, 15% came from the private sector. The management has not shared any guidance for the full year — a deviation from its usual practice. International orders, at Rs 8,872 crore, accounted for 38% of the total order inflow. As of June, the firm’s outstanding order book stood at Rs 3.05 lakh crore.

Revenue ramp-up will be gradual and take a few quarters to get near normal levels.
With partial lifting of the lockdown and resumption in business operations, domestic operations are expected to improve over the next few quarters. Ordering activity in roads, urban infra, railways, water distribution, irrigation sub-segments, and especially health care, are all expected to pick up in the second half of FY21.

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