India's Larsen & Toubro Limited's Order Book Value Reaches $22 Billion

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Researched by Industrial Info Resources (Sugar Land, Texas)--Leading Indian engineering, infrastructure and construction conglomerate Larsen & Toubro Limited (BSE:500510) (L&T) (Mumbai) has announced that its accumulated order book value has reached about $22 billion. A. M. Naik, Chairman and Managing Director of L&T also indicated that L&T was the first Indian private sector company to achieve this feat. L&T is second only to public sector enterprise Bharat Heavy Electricals Limited (BSE:500113) (BHEL) (New Delhi), which has an order book value of $32.1 billion.

As of December 31, 2009, L&T's combined turnover was $8.5 billion, with an order book value of $20.34 billion. The group's business spans three divisions: electrical and electronics, machinery and industrial products, and engineering and construction. The engineering and construction sector was the biggest order grosser with $19.95 billion. In the last three weeks alone, this division secured orders worth $2 billion. Despite an order inflow increase of 22%, during the quarter ended December 31, 2009, L&T's gross sales revenue dipped 6% to $1.81 billion. Delays in financial closure, and the progress of projects, as well as deferred large value orders have been attributed as reasons for the slump in sales revenues.

Experts have observed that L&T's order book value for this fiscal year looks strong and is poised for growth. Recently, the company secured a $62.51 million order to build a residential complex at Gurgaon in Haryana and a $126.3 million contract from Cognizant Technologies Solutions Corporation (NASDAQ:CTSH) (Teaneck, New Jersey), to construct a new facility at Chennai in Tamil Nadu. The company has also been awarded a $226.1 million turnkey contract for oilwell platform redevelopment as part of the second phase Mumbai High North project. A subsidiary of the state-run Oil & Natural Gas Corporation (BSE:500312) (New Delhi) has awarded a $454.3 million contract to L&T to construct an aromatics and petrochemicals project at a special economic zone in Mangalore, Karnataka. The construction division also bagged six orders worth $263.67 million to construct and install substations and electricity transmission lines. The orders include three contracts from the Middle East. The group also secured a $149.14 million order for infrastructure projects in Oman. This week, L&T was awarded a $312.5 million order to design and deliver a 4.17-million-ton-per-year fluidized catalytic cracker regenerator by Indian Oil Corporation Limited (BSE:530965) (Mumbai) and a $251.3 million material-handling and metallurgical contract.

L&T's order book value in the current quarter is about $3.4 billion, with the infrastructure division accounting for nearly 41.5% of the orders. The power, hydrocarbons, process and defense businesses have contributed 18%, 19.9%, 14.1% and 6.1% of the orders, respectively. Analysts are optimistic that the company will secure a contract valued at $893 million to $1.1 billion from the proposed bulk boiler tenders issued by thermal power company NTPC Limited (BSE:532555) (New Delhi).

Industry analysts have lauded L&T's achievement, indicating that as a private sector player, L&T has to compete for contracts with state-controlled and international firms. However, public sector enterprises like BHEL secure federal orders and contracts by default. BHEL's outstanding order book value is about $32.1 billion. By 2011-12, spurred by strong equipment demand from the power sector, BHEL is aiming for a combined turnover of $10 billion to $11 billion. The company has announced plans to increase its power equipment manufacturing capability from 15,000 megawatts (MW) to 20,000 MW by March 2012. On March 31, 2010, BHEL's provisional net profit was nearly $955 million, an increase of 37% year over year. In the fourth quarter of 2009-10, BHEL's net profit soared 40% to $421 million.

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