L&T net up 16%; concerned over economy but hopeful of reforms

Larsen & Toubro, the country's largest engineering company, reported a bigger-than-expected increase in net profit but disappointed the stock market with a fall in margins.

The company also expressed concerns about the slow pace of policy making and hoped that the government will speed up the reforms process to revive a sagging economy.

The company's net profit rose 16 percent to Rs 864 crore, and net sales rose 26 percent on year to Rs 11,955 crore.

A CNBC-TV18 poll had estimated net profit and sales at Rs 827 crore and Rs 10,951 crore, respectively.

Its EBITDA margin, or operating profit margin, was 9.1 percent, down 280 basis points YoY. Analysts had estimated the margin at 11.5 percent.

More from Business

Shares of Larsen and Toubro were at Rupees 1,373, down 1.23 percent.

[caption id="attachment_387373" align="alignleft" width="380"] Chairman at L&T, AM Naik. AFP[/caption]

The engineering giant said its order book as of June 30 stood at Rs 153,095 crore. The order book of the company is significant as it gives an indication of the health of the capital goods sector as a whole.

The company's other income rose a whopping 122 percent to Rs 606 crore. The increase has been attributed to higher dividend income from subsidiaries and treasury gains.

Net revenue from the engineering and construction (E&C) segment, core to the company, was Rs 10,441 crore, up 30 percent.

Notwithstanding the subdued economic environment leading to deferment of capital expenditure and expansion decisions, the businesses of the E&C segment garnered fresh orders of Rs 17,804 crore, the company said in a press release.

As on June 30, the segment had an order book of Rs 150,656 crore.

Of the total fresh order inflows, 56 percent was from the private sector, company officials said at a press conference. The public sector's share was a weak 22 percent.

The company said delayed policy measures, a slowdown in industrial production, elevated interest rates and liquidity concerns have moderated its growth prospects.

"This together with the uncertainties in the global markets, have impacted the investment sentiment, restricting thereby the business opportunities for capital goods industry," it said.

It also hoped for a renewed focus on economic reforms in the coming months to improve the investment momentum and attract capital reforms.

"On the international front, select markets in the Middle East, South East Asia and CIS countries hold promising prospects, where the company is strengthening its presence," it said.

View the entire release below: