L&T Q1 net profit falls 68% to Rs 537 crore amid Covid-19

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Published: July 23, 2020 3:00 AM

R Shankar Raman, chief financial officer, L&T said, “All businesses were held back by the pandemic and it was an unusual quarter on the challenges it posed. We have won orders despite the pandemic”.

The revenue of the heavy engineering and infrastructure major also crumbled under the pandemic’s impact which has disrupted business and economic activity all through. The revenue of the heavy engineering and infrastructure major also crumbled under the pandemic’s impact which has disrupted business and economic activity all through.

The Covid-19 pandemic has hit the earnings of infrastructure behemoth Larsen and Toubro (L&T) hard, as the consolidated net profit collapsed to Rs 303 crore, a sharp year-on-year decline of 79% for the June 2020 quarter. However, it was better compared to the Street’s estimates, which expected it to post a net loss of nearly Rs 468 crore.

R Shankar Raman, chief financial officer, L&T said, “All businesses were held back by the pandemic and it was an unusual quarter on the challenges it posed. We have won orders despite the pandemic”.

Calling the quarter “unprecedented”, SN Subrahmanyan, CEO and managing director, L&T said, “Our performance during the quarter should be looked at from the point of view that our hands, and legs were tied and eyes blinded yet we delivered a profitable quarter”. The interest cost during the quarter increased significantly by 80% to Rs 1,056 crore, which was due to additional liquidity buffer created to deal with the pandemic if the situation so arises. Also, with the commissioning of Hyderabad metro project where the interest capitalisation ceased and profit charges were booked. The staff cost was also up 35% y-o-y to Rs 6,153 crore largely because the company in the corresponding quarter did not have the benefit of consolidating Mindtree as the acquisition got consummated later. Adjusted for this increase in staff cost was to the tune of 7%.

The revenue of the heavy engineering and infrastructure major also crumbled under the pandemic’s impact which has disrupted business and economic activity all through. The revenue from operations declined 28% y-o-y to Rs 21,260 crore, as the company lost `12,500 crore of revenue during the quarter. Its operating income for the first quarter ended June 30, 2020, declined by 51% y-o-y to Rs 1,620 crore, while the operating margins declined 360 basis points to 7.6%. The operating income reflects lower sales volume and overheads absorbed due to the under recovery.

Tepid economic activity slowed down the order inflow momentum as well with fresh orders declining 39% on a y-o-y basis to Rs 23,574 crore. However, the order book at Rs 3.05 lakh crore saw an increase of 4% y-o-y. The orders largely came in from government sponsored programmes with private sector contributing just 15% of the order inflows.

Subrahmanyan said the company found that boards of many of the public sector clients could not meet and decisions could not be taken on virtual systems as government protocols do not allow to do that. “Though we had many of the projects where we were L1 and could have got the order, we could not get a decision because the boards could not meet. Some of this will happen in second and third quarter as well”. He added that nearly 70% of the company’s staff is back to work and 65% to 70% of the labour is back to work.

However, with the government funds getting diverted to social and distress financing, the government capex will be highly curtailed. “Our rough estimates is that Rs 8 trillion which is normally the capex of the central, state and public sector will come down to Rs 4 trillion this year,” Subrahmanyan said. Some of the projects which are funded by agencies like JICA (Japan International Cooperation Agency), Asian Development Bank, World Bank etc, though will come through, he said.

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