Infrastructure behemoth Larsen and Toubro (L&T) has been hit pretty hard due to the COVID-19 pandemic. Their earnings and consolidated net profit has significantly collapsed to about Rs. 303 crore; which equals to year-on-year decline of 97% for the June Quarter of 2020. However, if we compare it with the Street’s estimates, it is quite better as it expect them to post atleast a net loss of about INR 468 crore.
While both SN Subrahmanyan, CEO and managing director, L&T calling the quarter “unprecedented”, said, “Our performance during the quarter should be looked at from the point of view that our hands, and legs were tied and eyes blinded yet we delivered a profitable quarter.” Moreover, to deal with the pandemic, if the situation may arise, additional liquidity buffers were created. However, due to this, the interest cost during the quarter significantly increased by 80%, i.e., Rs 1,056 crore.
Furthermore, the commissioning of Hyderabad metro project where the interest capitalisation ceased and profit charges were booked, the staff cost was also up by 35 percent y-o-y to Rs 6,153 crore.
This was largely due to the company in the corresponding quarter, did not have the benefit of consolidating Mindtree as the acquisition got consummated later. And, the adjustment for this increase in staff cost was tuned to about 7%.
R Shankar Raman, chief financial officer, L&T said, “All businesses were held back by the pandemic and it was an unusual quarter on the challenges it posed. We have won orders despite the pandemic”.
While, when it comes to the revenue of the heavy engineering and infrastructure major, it is also crumbled under the severe force of pandemic’s impact as it has created a complete disruption across businesses and economies all throughout the world.
Due to the under recovery, the operating income reflects lower sales volume and overheads absorbed. As it was quite certain, the revenue from operations has declined 28% y-o-y which amounts to Rs 21,260 crore, as the company has lost `12,500 crore of revenue during the quarter. Further, Its operating income for the first quarter which ended last month (June 30, 2020), declined by 51% y-o-y to Rs 1,620 crore. And, the operating margins declined 360 basis points to 7.6%.
According to Subrahmanyan, as government protocols do not allow the decisions made during virtual meetings, the company found that boards of many of the public sector clients could not meet and decisions could not be taken on virtual systems. “Though we had many of the projects where we were L1 and could have got the order, we could not get a decision because the boards could not meet. Some of this will happen in the second and third quarter as well. Our rough estimate is that Rs 8 trillion which is normally the capex of the central, state and public sector will come down to Rs 4 trillion this year,” he added.
He also had to say that nearly 65% to 70% of the labour is back to work, and almost 70% of the company’s staff is back to work.