L&T: Building The Nation

A specialist in infrastructure creation as well as a well-respected name in the sector, the financial year 2018-19 saw Larson & Tubro (L&T) once again turning in a stellar performance on all key parameters. This alone would be enough to put the company in any list of India’s top companies. It is, therefore, hardly surprising that the company figures in the BW Businessworld annual list of India’s Most Respected Companies. 

For L&T, like any other infrastructure creator, order inflows are its lifeblood. In FY19, they came in at Rs 176,834 crore registering a strong growth of 16 per cent over the previous fiscal. The unexecuted order book as on 31st March 2019 stood at Rs 293,427 crore which gives the company strong revenue and margin visibility for the next few years. 

Revenues in FY19 amounted to Rs 141,007 crore registering a growth of 18 per cent over FY18. The profit after tax (PAT) touched an all-time high of Rs 8,905 crore during the fiscal and represented a substantial growth of 21 per cent over the previous fiscal. 

The touchstone of L&T, according to A.M. Naik, currently the non-executive chairman, has been its focus on shareholder value creation. He says L&T delivered on this front in FY19 as well. “It gives me great pleasure to inform you that the Board of Directors recommended a dividend of Rs 18 per share. The corresponding dividend in the previous year was Rs 16 per share,” the company’s latest annual report quoted Naik as saying.

Let’s examine the financial performance of the company for the fiscal ended March 31, 2019. The total income stood at Rs 89,757 crore as against Rs 76,224 crore during the previous financial year registering an increase of 18 per cent. The profit before tax from continuing operations including exceptional items was Rs 9,218 crore as against Rs 7,262 crore recorded during the previous financial year, registering an increase of 27 per cent. The profit after tax from continuing operations including exceptional items was Rs 6,678 crore compared to Rs 5,387 crore accrued during the previous financial year, registering an increase of 24 per cent.

As of 31st March 2019, the gross property, plant and equipment, investment property and other intangible assets including leased assets were worth Rs 12,174.29 crore whereas the net property, plant and equipment, investment property and other intangible assets, including leased assets were worth Rs 7,934.32 crore. Capital expenditure during the year amounted to Rs 1,571.41 crore.

L&T’s five-year strategic plan ‘Lakshya’ is its roadmap for growth and value addition. Lakshya extends from FY17 to FY21 and encompasses every major performance parameter to achieve the overarching goal of boosting return on equity (RoE). 

“We remain confident of achieving the goal in FY21 (the terminal year of the plan) and in the meantime, we have been developing the next strategic plan (to be launched from FY22) to ensure steady, profitable growth into the future,” says Naik.

However, the changing political scenario across several states (change of government in states like in Maharashtra and a few others) is expected to have some impact on the order book of L&T, say sector experts. 

Larsen & Toubro, according to some analysts, is likely to miss its FY20 order inflow guidance of 10-12 per cent, reflecting the economic slowdown. According to those who track the company closely, L&T reportedly received just four orders in the third quarter with three of them worth less than Rs 2,500 crore each and just one contract worth more than Rs 7,000 crore. Compared to this, L&T had won orders worth Rs 1.76 lakh crore at the group level in FY19 and clocked a growth of 16 per cent over the previous year.