Profit after tax excluding exceptional and extraordinary items rose 6.85 per cent to Rs 977.51 crore from Rs 914.76 crore, the company said in a BSE filing.
Larsen & Toubro said the numbers would have been worse had it not been for an increase in overseas orders.
In Q2 of the last fiscal, Larsen & Toubro reported net profit of Rs 1,137.31 crore, which included an exceptional gain of Rs 214.29 crore and an extraordinary item of Rs 52.89 crore.
Larsen & Toubro net sales grew 9.96 per cent to Rs 14,509.51 crore from Rs 13,195.23 crore.
"Despite difficult times, we had good growth in sales. International business has done significantly well with it contributing nearly 32 per cent of sales. There was muted growth on the domestic front," Managing Director and Chief Executive Officer K Venkatraman told reporters here.
Larsen & Toubro shares gained 4.2 per cent to Rs 872.05 at the close on the BSE.
Sanjeev Zarbade, vice president, private client group research at Kotak Securities, said, "Larsen & Toubro numbers are ahead of our expectations, though other income of Rs 449 crore was the main reason for profit rise."
He said the infrastructure and hydrocarbon businesses performed well, while sales in the power, hydrocarbon and metallurgical and material handing divisions declined.
Order inflows grew 27 per cent to Rs 26,533 crore from Rs 20,967 crore.
"While 71 per cent of the new orders came from the domestic market, 29 per cent came from international market. Our thrust on increasing international footprint is evident, where both sales and order inflow contribution has been increasing," group CFO S Shankar Raman said.
"The domestic market continues to be challenging. The government is taking initiatives to improve investment sentiment, but for them to translate into order flow for an E&C company like us is a few quarters away," he said.
International order inflows more than doubled, contributing 43 per cent of the total on the back of contracts for large projects in the Middle-East.
Larsen & Toubro's order book grew 11 per cent to Rs 1,76,036 crore as of September 30.
"We are maintaining our guidance of 25 per cent increase in order inflow and 15 per cent growth in sales for FY14," Raman added.
The infrastructure business reported a 30.76 per cent growth in revenue at Rs 7,198.44 crore, while a segment that includes integrated engineering services, ship-building and property development reported a 53 per cent rise in revenue to Rs 527.36 crore.
On the other hand, revenue from the hydrocarbons business was down almost 9 per cent to Rs 2,231.6 crore, while that from the power business declined by over 40 per cent to Rs
1,181.16 crore. Metallurgical and materials business revenue was down over 23 per cent to Rs 1,115.11 crore.
Total expenditure at Rs 13,324.17 crore accounted for 91.83 per cent of net sales.
Larsen & Toubro Ebitda margins slipped to Rs 1,402 crore from Rs 1,404 crore a year ago, which the company attributed to an increase in manufacturing, construction and operation expenses.
"There has also been an increase in staff cost led by manpower augmentation, higher annual revisions and increased overseas deputation. Further, there has been an increase in the mark-to-market expenses on account of forex loans which are unhedged," Raman said.
He said there have been some under-recoveries, which impacted Larsen & Toubro margins.