Larsen & Toubro (L&T) expects its order book position to rise to about Rs 4.5-4.8 trillion in the next three years, even as the engineering and infrastructure conglomerate is scouting for investors for its Hyderabad Metro project. The firm also expects to close technology partnerships for its electrolyser project for manufacturing green hydrogen in 12 months, a top official said.
“If we continue to grow well by 10-15% year-on-year, we will get about Rs 5-6 trillion of fresh orders and the order book position is expected to be about Rs 4.5-4.8 trillion in the next three years. At present, our fresh order run rate is about Rs 2 trillion,” L&T Whole-time Director & CFO R Shankar Raman told FE in an interaction.
L&T’s present orderbook, generally executed over three years (certain projects have longer execution periods of 4-5 years), stands at an all-time high of Rs 3.86 trillion.
Under its ‘Lakshya 2026’ plan, L&T is targeting group revenues of Rs 2.7 trillion and a Return on Equity of over 18% by FY26. According to the five-year plan, the company will exit non-core businesses, develop innovative business offerings, scale up digital and e-commerce businesses, focus on Environmental, Social and Governance (ESG) and shareholder value creation.
On the green hydrogen initiatives, wherein the firm had announced plans to invest up to $2.5 billion in 3 years, the group expects to close technology partnerships in the next 12 months.
L&T, which took a Rs 3,000 crore interest-free loan from Telangana, will use it to repay the debt of its Hyderabad Metro project, which has a debt of Rs 13,000 crore. The group is also looking to generate another Rs 2,000 crore by monetising real estate assets attached to the metro project.
“With the ridership, which has moved up to 4.5 lakh per day from the earlier 3.5 lakh, and further rising to 4-4.5 lakh, coupled with the reduction in debt would enable the asset to become attractive to invest. We will be able to attract an investor or investors who can bring in another Rs 2,500-3,000 crore, which would help in further debt reduction,” he added.
On the divestment plans, the company expects to complete that of L&T IDPL by June, even as it is waiting for “right price” for its Nabha Power project, which is making money. On the company’s digital platform Planet, an app for retailing financial products, the company expects it to be completed in the next 1-1.5 years.
“We have our task cut, and we have to just put our nose to the grindstone and work,” Raman added.
The Ebitda margins of L&T’s IT and Technology Services segment was down during the quarter ended December 31, 2022, to 19.2% from 23.6% recorded in the year-ago quarter, impacted mainly due to one-time merger integration expenses of LTIMindree.
“When two large companies are integrated, the revenue arising from those reorganising costs are not optimal. We also incurred a lot of one-time fees, which resulted in the margin dip in the third quarter. There won’t be these one-off charges in the fourth quarter and we expect margins to recover in phases. It will take two-three quarters for the company to get back to its normal margin position,” he said.
Following the 33% hike in capex spend for FY24 amounting to ?10 trillion announced in the budget, private capex in the country is also expected to follow suit, he said, adding it would open up in phases.
“I don’t think it will open up in any big bang manner. The general business sentiment is positive, industries are optimistic, and from both the domestic and global perspective these will translate into private capex. Sectors such as minerals, metals and automobiles have discovered their pricing power as demand picked up. As countries started operating on China+1, India products and services are also in demand,” Shankar Raman said.
“Private sector would come in airports, railway stations, data centres, renewable energy as the country transits to more and more clean energy among others,” he added.