Larsen & Toubro Ltd.‘s second-quarter revenue rose as the economy recovered after the second wave of the pandemic and construction activity gathered pace.

Revenue of India’s largest engineering-to-construction company increased 18.5% quarter-on-quarter to Rs 34,772.9 crore in the three months ended September, it said in its exchange filing. That compared with the Bloomberg consensus estimate of Rs 35,513.2 crore.

Net profit rose 54.9% over the preceding quarter to Rs 1,819.5 crore, compared with the consensus estimate of Rs 1,776.9 crore.

• Operating profit rose 26% to Rs 3994.9 crore. Analysts polled by Bloomberg were expecting Rs 3,999.4 crore.

• Operating margin rose to 11.5% compared to 10.8% in Q1 FY22. Analyst expected Ebitda margin at 11.3%.

• Net working capital stood at 22% compared with 26% a year earlier. It has paid off Rs 20,000 crore of debt taken early last year in anticipation of any liquidity issue due to Covid-19. That reduced the finance cost in the second quarter.

On an annual basis, revenue increased 12%, Ebitda went up by 19.8% while profit declined 67%. That came as the government had imposed a restrictions across the country to curb the Covid-19 pandemic’s spread.

The company expects growth in order inflow to be in low-to-mid teens in fiscal 2022.

The quarter saw the company re-grouping of its manpower due to the second wave and supply-side constraints due to container unavailability and port restrictions in certain countries.

Commodity prices for the company rose 50% due to higher prices of steel and copper. About 65% of the contract have pass-through of raw material cost hikes. But there will be a timing mismatch, said R Shanker Raman, whole-time director and group chief financial officer.

The company’s order flow stood at Rs 42,140 crore in the second quarter, led by orders worth Rs 14,503 crore in its hydrocarbon segment. The total order book grew 11.3% over year to Rs 3.3 lakh crore.

Segment Revenue

The infrastructure arm led revenue growth, with a 34.3% rise over the preceding quarter to Rs 10,543.5 crore.

The second quarter saw order tendering worth Rs 2 lakh crore and awards of Rs 86,000 crore. The company hopes orders were deferred and not cancelled, said Raman, adding that states and central tenders have come down and this vacuum has been filled by public sector units. Raman expects the contracts to be awarded in the second half of the fiscal as some of the states are headed to polls next year.

Outlook

With the weakening of the second Covid-19 wave and sustained vaccination effort, the overall business environment is looking more positive and this should lead to the Indian economy registering good growth in the medium term, the company said in the exchange filing.

Shares of L&T fell 0.6% on Wednesday, compared with the benchmark BSE Sensex’s 0.3% decline.