Mumbai:The net profit of India’s biggest engineering and construction firm Larsen & Toubro Ltd (L&T) rose 73% to Rs348 crore for the July-September quarter from Rs201 crore a year earlier on the back of more orders. The company’s results beat estimates and its shares registered their biggest gain in 16 months.
L&T’s revenues for the second quarter of the current fiscal rose 47% to Rs5,574 crore. And its order book expanded 26% to Rs7,547 crore. Out of this, orders worth Rs5,905 crore came from the firm’s biggest business, the engineering and construction segment. About 26% of the orders booked in this segment came from international clients.
The engineering and construction business contributed Rs4,263 crore to the firm’s revenues for the quarter.
L&T, India’s second best performing benchmark stock this year, forecast profit and sales growth will be sustained as it benefits from the government’s $492 billion (Rs19.4 trillion), five-year infrastructure spending programme.
Record oil prices are also driving a building boom in West Asia, from which the company receives most of its overseas contracts.
Turnkey focus: L&T chairman and managing director A.M. Naik
“There’s no dearth of orders,” said R.K. Gupta, who manages the equivalent of $75 million, including 20,000 shares of L&T, at Credit Capital Asset Management in New Delhi. “With the growth story staying intact, the infrastructure sector’s future is bright.”
Shares of L&T closed at Rs3,876.80 each on BSE on Friday, up 12.168%.
“Our efforts towards selecting the right jobs, reducing the job size and concentrating on few locations to perform better were the key factors that contributed towards the growth in profitability,” said chief financial officer of L&T, Y.M. Deosthalee, while announcing the financial results.
A company official, who did not want to be named, said L&T would in future focus on taking up bigger projects for execution on a turnkey basis. “We will leave smaller jobs to smaller contractors,” he added.
K. Venkataramanan, member of the board and president (operations), said L&T will buy stakes in coal mines in Indonesia and Australia if it wins the imported coal-based ultra mega power project planned by the Union government at Krishnapatnam in Andhra Pradesh.
“Without equity stakes in coal mines in these coal producing countries, we will not be able to ensure stability in coal supply for the project. If we win the deal, we will go ahead with the stake buy, which has been discussed and finalised with coal mine operators in these countries,” Venkataramanan added. He declined to reveal further details.
L&T, Reliance Power Ltd and Sterlite Industries Ltd have submitted financial bids for the project. The government is expected to name the successful bidder for the power project by 30 November.
Deosthalee said L&T was working towards listing its information technology subsidiary L&T Infotech Ltd sometime in the second half of 2008-09.
Bloomberg’s Gautam Chakravorthy contributed to this story.