L&T Q2 results update

• Recovery seen in Q2: L&T has been amongst the companies which have been most impacted by the lockdown, as labourers migrated to their hometowns and infra projects came to a halt in the previous quarter. In the Q2FY21, some recovery was seen with net profit from continuing operating before exceptional items falling 45% on-year to Rs 1,410 crore. The bottom line was impacted due to lower revenue, credit provisions in its financial services segment.  
• Exceptional item:  L&T has reported an exceptional cost of Rs 3,732.30 crore, which includes impairment of funded exposure in the heavy forgings facility joint venture and impairment of assets in the power development business. Including this exceptional item, the company’s loss stands at ₹2,322.10 crore. 
• Revenue in-line with estimates: Revenue fell 12.2% over the year ago to Rs 31,034 crore. The decline was mainly caused due to a 20% fall in its mainstay Infrastructure segment. Though order activity picked up compared to the first quarter, bid deferrals and loss of some select prospects impacted order inflow. L&T completed the sale of its electrical and automation unit to Schneider Electric during the July-September period.

• Order inflow weakens: L&T bagged orders worth ₹28,039 crores at the group level during the September quarter registering a decline of 42% on a YOY basis. International orders constituted 36% of the total order inflow. The consolidated order book of the company stood at ₹2.98 lakh crore as of Sep 30, 2020. 
• Special dividend: L&T has announced a special dividend of ₹18 per share for FY21. The record date has been fixed as November 5th for the same.

L&T has reported Q2 results largely in-line with expectations. While there are green shoots of recovery, a full-blown recovery could take a few more months. L&T said that it is seeing tremendous uncertainty in the current environment, and still discovering what the new normal could be post Covid. The company has refrained from providing any guidance. 

In terms of the order pipeline, L&T has received a letter of intent from the government for a bullet train valued at Rs 25,000 crore. The project will be completed in four years, adding to order inflow in the third quarter. At the moment, the orders are coming in from only state and central government, many funded by multi-lateral agencies. While the infrastructure segment’s growth was weak in the quarter, strong emphasis by the government on infrastructure spending augurs well for the company. L&T’s diversified business portfolio, a robust Balance sheet and strong order book position will help them sail through the ongoing crisis.