L&T’s Q1 net profit jumps 46%; board approves ₹10,000 crore share buyback

• L&T’s board approved a buyback at a maximum price of ₹3,000 per share for an aggregate consideration of up to ₹10,000 crore.
• Special dividend was announced to mark the end of A M Naik’s tenure with the company.
  
• Stress in core segment margins will continue for next two quarters as it carries post-Covid, post-war overhang.

Infrastructure major Larsen & Toubro’s (L&T) Q1 consolidated net profit went up by 46% to ₹2,493 crore, from ₹1,702 crore in the same quarter last year. It also said the board of directors approved a share buyback at the maximum price of ₹3,000 each for an aggregate consideration of up to ₹10,000 crore.

The proposal is subject to the approval of shareholders.

The board also approved a special dividend of ₹6 per equity share to mark the end of chairman A M Naik’s extraordinary tenure with the company, said R Shankar Raman, L&T's CFO said in an earnings conference call.

Naik will retire as the non-executive chairman of the company in September this year, after which the current CEO & MD S N Subrahmanyan will take over as its executive chairman and MD.

Revenue guidance unchanged

L&T’s consolidated revenues went up 34% to ₹47,882 crore for the quarter, from 35,853 crore in Q1 of FY23. The company said that it was primarily aided by the execution of a healthy order book in its projects and manufacturing portfolio.

However, Raman refused to change the goalpost of the revenue guidance of 12-15% given for FY24. “If all goes well, we will be at the upper end of the guidance,” he said.

The company received orders worth ₹65,520 crore at the group level during the quarter, registering a y-o-y growth of 57%. International orders at ₹27,646 crore during the quarter comprised 42% of the total order inflow.

The company said that orders were received across diverse segments like rail, renewables, rural water supply, transmission & distribution, IT & office space and onshore and offshore verticals of the hydrocarbon business, during the quarter.

The consolidated order book of the group is at ₹4,12,648 crore as on June 30, 2023, with international orders having a share of 29%.

“Capex buoyancy in India Gulf Cooperation Council is providing the much-needed tailwinds for growing our projects & manufacturing portfolio, ably supported by the resilient performance of the services businesses,” said S N Subrahmanyan, CEO & MD, Larsen & Toubro.

Core segment margins to remain stressed in near term

Its infrastructure segment saw order inflows of ₹40,051 crore, double what was recorded in the same quarter last year. The EBITDA margin of the segment during the quarter, however, reduced to 5.1% vis-à-vis 6.5% recorded in the corresponding quarter.

The infrastructure business orders that were executed during the quarter were won in the second half of FY22 and FY23. The pricing of these orders factors in inflationary trends seen in the post-Covid, post-War period, Raman said explaining the margin squeeze seen in the segment during the quarter.

He added that this segment’s margins will continue to be subdued for the next quarter or two. “Improvement in margin trajectory will be seen only in Q4. In fact 2024-25 will be a far healthier period,” Raman said.

In its outlook, the company said that major economies are turning around the corner. Major oil producing nations continue to invest in oil & gas, industrialisation and energy transition initiatives, which will augur well for the company’s projects business.

L&T said that in the backdrop of this mixed sentiment, its focus will remain on cash generation and judicious capital allocation. “The company has a robust order prospects pipeline in the medium term and is confident of sustaining its growth momentum by utilising the emerging opportunities, with an overarching aim of improving shareholder value on a sustainable basis,” it said in a press release.