L&T dampener: Quick revival of domestic demand unlikely


Splashing cold waters on the hopes of an early recovery in domestic demand, India’s one of biggest conglomerates—Larsen & Toubro Ltd (L&T)—has said that its growth is still being pushed by international orders.

L&T, which has diverse activities from transport, infrastructure and military equipment to financial services, said international orders doubled in the three months to the end of June from a year ago and now constituted 44 percent of new orders.

Across the business, orders rose a more modest 11 percent, helped by major infrastructure, hydrocarbon and heavy engineering orders. “Conditions in the domestic market are still sluggish,” said a senior financial officer a few days back after L&T posted a 10 percent rise in first-quarter revenue.

L&T has been expanding overseas to offset weak demand at home amid a sharp economic downturn. “We are waiting for the domestic industry to pick up, growth to pick up.”

Profit after tax came in at 9.67 billion rupees, more than double last year. This was aided by the sale of Dhamra port, which netted it 13.5 billion rupees and rescued the firm from posting a loss.

Other project sales during the quarter included stake sales in L&T Finance Holdings Ltd and City Union Bank Ltd.

Executive Chairman A M Naik said in May he saw an improvement in the business outlook after the election of a new government raised the possibility of the authorities approving a backlog of projects that has hit infrastructure.

But the prospect of a revival in domestic demand is yet to filter through to a big rise in new orders, nor encourage infrastructure companies such as L&T to commit to new capital expenditure – central to any sustained economic recovery – because of spare production capacity.

Raman said he expected L&T to meet its guidance of 15 percent revenue growth and a 20 percent rise in order inflow in 2015. He retained his medium-term outlook for a gradual recovery in India’s economy.

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