L&T gets Rs 8,250 crore Riyadh Metro order

Engineering and construction company Larsen & Toubro (link) has won a sizeable international order from the Arriyadh Development Authority (link), as part of a consortium to build a metro for the city of Riyadh, in Saudi Arabia. L&T said that it has got an order worth $1.4 billion or Rs 8,250 crore for design, construction and commissioning of a metro project.

L&T is part of the Arriyadh New Mobility Consortium, with the other partners in the consortium being Italy-based Ansaldo STS (link) and Impregilo (link)Bombardier Transportation (link) and Saudi Arabia-based Nesma & Partners(link). The total value of the order awarded to the consortium, said L&T, is $5.9 billion or about Rs 35,000 crore.

The project will be implemented over four years and will be preceded by 8 months of preparatory work. The ADA website said that work is expected to start in the first quarter of 2014. The scope involves design, construction and commissioning of one line—line 3 that will have a capacity to carry 5000 passengers per hour in one direction. L&T’s part of the contract includes building bridges, tunnels, stations, and related infrastructure.

Ansaldo STS said that the winning consortium is organised by Ansaldo and comprises Salini-Impregilo, L&T and Nesma for the civil works, Ansaldo STS for the technological part and Bombardier for the supply of vehicles. Ansaldo said that its share of the contract is worth approximately $680 million with an option of $249 million to be earned over 10 years for maintenance.

The ADA’s website says that has awarded the order to three parties, the New Mobility Consortium led by Ansaldo STS, a $9.5 billion order to the BACHS consortium headed by US-based Bechtel and a $7.8 billion order to the FAST consortium headed by a Spanish firm FCC Construction.

The order is significant as it represents over a third of L&T’s order inflows in the June quarter. It will also boost its international order book by two-fifths, which stood at Rs 19848 crore as of the end of the June quarter and contributed to 12% of L&T’s Rs 165,400 crore order book.

The benefits from this order will be in the very long term, since the work itself is expected to start only post-January 2014. But it is a sizeable order that has come at a time when domestic order book flow has been quite below expectations. This order had a positive impact on the company’s share initially, but the share settled down and is up by 0.4% as of 1.35pm on the BSE. Investors must have realised that this order will bring in revenues only over the very long run, tempering their initial enthusiasm.

Read the press release from L&T here (link).

Updated with corrected order size in headline of Rs 8,250 crore.

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