Engineering conglomerate Larsen & Toubro (L&T) has lost 12,000 crore rupees to be billed due to the nationwide foreclosure, management said to employees during the meeting. ; a webinar this week. As the company seeks to postpone monetary valuations, analysts are concerned about the performance of the June quarter.
According to people in the know, S N Subrahmanyan, general manager and chief executive officer (CEO) of L&T, established the billing loss at Rs 12,000 crore, during a webinar with employees. Sources say the top boss added in anticipation of weak orders in the Middle East, L&T will focus on orders from African markets.
Sources added, L&T senior management said the company will go ahead with non-monetary assessments like designation promotions, while it will postpone monetary assessments. The decision not to postpone promotions, sources add, aims to ensure that employees' career paths are not affected.
An email request sent to L&T went unanswered.
READ ALSO: India Has Lowest Daily Growth Rate Of New Covid-19 Cases: Government
Historically, the first quarter of L&T has always been more moderate in terms of execution rates, but it is important to set the tone for execution in the coming year. Therefore, analysts believe that the soft lock in the first quarter may also affect the performance of subsequent quarters.
Naveen Kulkarni, chief investment officer (CIO) at Axis Securities believes that if business continues to be impacted in the first quarter, L&T may in fact end up declaring a loss. The downturn that will follow lockout, labor shifts and, in turn, rising labor costs and other cost escalations will also have an impact. The hydrocarbon segment is already facing challenges. This may mean that the profits of EX21 could be 25 to 50% successful, analysts say, while remaining alert to developments.
L&T recorded 20% of its estimated revenue for fiscal 2010 (Rs 147, 126 crore) in the June 19 quarter, while the quarter contributed approximately 15% to its profits.
Analyst Umesh Raut of Yes Securities said that while he envisioned a 12% impact on the March 2020 quarterly results, April was also a washout. Although he still expects revenues of 20,000 crore rupees in the first quarter (about 25% less than the quarter of the previous year), he has an eye on the progress and restart of activities and will work its figures after the results. Costs have already increased and, with increasing project spending, margins could be significantly affected. Raut says they could slide to a figure in the first quarter (20.4% in the June 19 quarter).
READ ALSO: HDFC invokes pledged shares to acquire a 6.43% stake in Reliance Capital
In terms of the order book, analysts expect L&T to consolidate its position in certain business sectors. "We are seeing more and more consolidation opportunities as the leader puts its best foot forward in the engineering and construction (E&C) market. This would help L&T recover from cyclical lows; the magnitude of the recovery, however, depends on how management responds to certain key investor concerns, "said Edelweiss analysts in a April 24 note on the company. The note also added that the company had signed orders worth more than $ 3.5 billion, or 20% of the 2010 order intake expected by L&T, during the 15 last days despite the lockout.
In a separate note, Edelweiss analysts said that the L&T agreement to sell its electrical business to Schneider Electric is expected to be completed in the first half of EF21. The completion of the transaction will earn L&T another crore of Rs10,000 in cash (after-tax proceeds of the transaction).