Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Larsen & Toubro Ltd (LTOUF, Financial) received a BBB+ rating with a stable outlook from both Standard & Poor's and Fitch, underscoring the company's robust financial health.
- MSCI ESG Research upgraded L&T's rating from BB to BBB due to improvements in various ESG parameters.
- L&T Semiconductor Technology Limited, a wholly owned subsidiary, acquired a 100% stake in Silicon Systems and signed a master collaboration agreement with Aditya Infotech Limited.
- L&T Finance achieved a 95% utilization of its loan book and reported a 29% growth in PAT for Q1 FY25.
- Group order inflows, revenues, and PAT for Q1 FY25 increased by 8%, 15%, and 12% respectively, indicating robust performance across financial parameters.
Negative Points
- The prospects pipeline for the remaining nine months of FY25 decreased by 10% year-on-year, primarily due to a fall in the hydrocarbon prospects pipeline.
- The working capital-to-revenue ratio increased from 12% in March '24 to 13.9% in June '24, indicating a buildup in gross working capital.
- The energy segment margin for Q1 FY25 decreased to 8.7% from 9.1% in Q1 FY24, reflecting jobs in the early stages of execution.
- The Hyderabad Metro reported a consolidated loss of INR2.14 billion in Q1 FY25, although this was an improvement from the previous year's loss.
- The Q1 FY25 revenue for the 'Other' segment decreased by 37% year-on-year, largely due to lower handover of residential units in the realty business.
Q & A Highlights
Q: The order prospect declined QoQ, with a significant drop. Is this primarily related to Saudi Aramco, and does it impact the order inflow guidance for this fiscal?
A: The drop is largely in the hydrocarbon segment due to tendering outcomes and project deferrals. However, this does not change our 10% order inflow guidance for the full year.
Q: Are we looking to invest in projects converting oil to chemicals and petrochemicals in the Middle East?
A: We are pursuing EPC opportunities in the oil-to-chemicals sector in the Middle East, but we are not looking to form any joint ventures.
Q: Has there been any outreach by Andhra Pradesh to revise the Amravati contracts that were dropped from L&T's order book?
A: Initial discussions with the state government have commenced, but it is too early to comment on the exact outcomes. We expect better visibility by the end of Q2.
Q: What is the size of the renewable EPC, specifically solar EPC, in your order book, and what is the size of order prospects in the Middle East?
A: The solar renewable order book is approximately INR55,000 crore to INR60,000 crore, with similar prospects for the near term.
Q: Can you explain the rationale behind the ESG upgrade by MSCI to BBB from BB?
A: The upgrade is due to improved environmental and safety statistics pursued by L&T. There has been no change in MSCI's outlook regarding our defense exposure.
Q: Are there any challenges with labor availability impacting execution, and have they worsened over the last year?
A: Labor availability was impacted in Q1 due to elections and extreme heat. We expect normalcy to return with the start of the monsoon. However, there is a developing concern about skilled labor shortages as infrastructure investments increase.
Q: What is the potential for monetization of Nabha Power or Hyderabad Metro?
A: We are pursuing monetization opportunities, but there is nothing concrete to share at this juncture. Nabha Power is performing well, and discussions are ongoing.
Q: Can you provide an update on the Hyderabad Metro TOD pipeline and government support?
A: We have a TOD monetization pipeline of 14.9 million square feet, with 1.3 million already developed. We have received INR900 crore from the government and are awaiting the balance INR2,100 crore.
Q: What are your capabilities in nuclear projects, and what are the upcoming opportunities?
A: We cover the full spectrum of nuclear power plant construction and related mechanical works. We have a prospects pipeline of INR7,000 crore to INR10,000 crore for the next nine months, primarily from NPCIL projects.
Q: How is the domestic private CapEx cycle looking post-election, and what are the key areas of investment?
A: There is positive momentum in real estate, including residential, commercial, and data centers. Investments in sectors directly related to infrastructure, such as cement and steel, are also picking up. However, public-private CapEx is still some time away.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
