Larsen & Toubro has forecast its FY’10 order inflow to grow by 25%-35%

Larsen & Toubro

Engineering company Larsen & Toubro’s order inflow in FY’09 increased by 24% to Rs 52,000 crore. In the fourth quarter ended March 2009, its order inflows were Rs 12,900 crore, flat compared to last year. The order book is a key measure used to evaluate how much an engineering company’s revenues will grow in the near to medium term.

One reason to be concerned is that two major sectors contributing to L&T’s order inflows are oil & gas and infrastructure. Falling crude and downstream product prices have led to global refiners putting capacity expansions on hold. Infrastructure projects too have taken a hit and L&T’s infrastructure segment includes industrial and commercial buildings too. It mentions that some oil & gas projects, which were expected in Q4, may be finalised in FY’10.

L&T is expecting new segments like power equipment and railways to prop up the order book. Large power generation and transmission projects in the country are expected to create demand for power equipment and project services. Still, its expectations for order book growth in FY’10 seem ambitious, especially at the upper end of the range. In the current fiscal, the election of a new government is certain to delay central government related infrastructure spending to much beyond the June quarter. The economic slowdown too will see projects being put on hold or slowing down. The less said about export markets the better.

If there is some credibility to these numbers, it stems from L&T’s reputation in the engineering industry. It needs to deliver these numbers if it wants to protect it. Its share price was trading up by 1.3% at Rs 890. 

Comments are closed.