L&T’s Q2 net profit grows 23% to ₹2,229 cr, margins soften on input cost pressures

L&T’s Q2 net profit grows 23% to ₹2,229 cr, margins soften on input cost pressures
R Shankar Raman, CFO of L&T
  • L&T reports net profit of ₹2,229 crore for the quarter ending September.

  • Revenue from operations during the quarter rose 23% at ₹42,762 crore as against ₹34,772 crore last year.

  • The company bagged orders worth ₹51,914 crore at the group level during the quarter.

Larsen & Toubro (L&T) today reported a 22.5% jump in consolidated net profit to ₹2,229 crore for the second quarter as compared to ₹1,819 crore in the same period last year.

Revenue from operations during the quarter rose 23% at ₹42,762 crore as against ₹34,772 crore last year.

Its operating margin came down marginally to 11.46% in Q2 from 11.49% last year. While margins in segments like energy, high-tech manufacturing and development projects have improved y-o-y, margins narrowed in the IT services segment and the key segment of infrastructure.

In the infrastructure segment, its Q2 EBIDTA margins stood at 6.6%, lower than the 8.3% that it had recorded in the same quarter last year.

“The softness of EBIDTA margins can be attributed to the mix of jobs, their progress and input cost pressures due to commodity price movements in the last 12-18 months. Since there is now softness in commodity prices, we should be able to recoup what we have lost in the first half of the year,” said R Shankar Raman, CFO of L&T in an earnings conference call.

During the quarter, the company recorded orders worth ₹51,914 crore at the group level, growing 23% on year. Two-thirds of these orders are for domestic jobs. International orders stood at ₹17,341 crore during the quarter comprising 33% of the total order inflow.

The consolidated order book of the group stood at ₹3.72 lakh crore as on September 30, 2022, with international orders having a share of 28%.

Given the order booking that has been seen in the first half of the year, the company said that it’s confident of meeting its 12-15% revenue and order book guidance – at the upper end of the bracket.

The company also recorded an exceptional gain of ₹300 crore from divestment of stake in subsidiary companies in July-September; as compared to ₹782 crore last year.

Particulars Q2 FY23Q1 FY23Q2 FY22
Revenue from operations ₹42,762 crore ₹35,853 crore ₹34,772 crore
Net profit ₹2,229 crore ₹1,702 crore ₹1,819 crore

L&T also said that the sale of its 1,400 MW Nabha power plant in Punjab might not take place this financial year. Raman said that running thermal power plants is not the ‘flavour of the season’.

“Investors in the market are looking for broken power plants and Nabha is a well-running unit but it’s not causing any stress,” he said, answering questions on its divestments.

The engineering and construction behemoth sees inflation and certain global headwinds impacting the country’s growth trajectory.

“High inflation, coupled with threat of an adverse BoP amidst the increasing uncertain global economic environment are possible headwinds to the country’s growth trajectory. Large value private sector investments that was set for a major revival may get delayed due to the persisting geopolitical and global economic turbulence,” said the company in a release.

L&T believes the government may intensify its efforts on structural reforms in critical areas such as labour, logistics, health and education.

“On the global front, the economic outlook is clouded by key downside risks, viz., the conflict in eastern Europe impacting food and energy supply chains, gradual polarization and possibility of stagflation resulting from supply-led inflation in an uncertain demand environment,” said L&T.