India's L&T Records 24% Growth in Orders During 2008-09

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Researched by Industrial Info Resources (Sugar Land, Texas)--Larsen & Toubro Limited (BSE:500510) (L&T) (Mumbai), one of India's largest engineering and construction companies, posted a 24% growth in orders for the 2008-09 fiscal year compared to 2007-08. The company won a number of domestic and international orders across sectors worth $10.6 billion in 2008-09, compared with orders worth $8.5 billion in the previous year. Continuing the bullish streak of order inflows, the infrastructure major has projected an order guidance valued at between $13.2 billion and $14.2 billion for the current fiscal year, representing 25-35% growth in order inflows on a year over year.

L&T is maintaining an optimistic outlook for the current fiscal year despite the dismal economic situation worldwide. This follows the recent positive announcement made by competitor Bharat Heavy Electricals Limited (BSE:500103) (New Delhi), which ended 2008-09 with a cumulative order book value of more than $23.45 billion, recording a 37% growth in orders on a year-over-year basis. The company achieved a turnover of more than $5.5 billion in 2008-09.

Orders from public-sector enterprises in the railways, hydrocarbon and power-equipment sectors will be a significant part of L&T's order book for the current fiscal year. According to industry sources, state-owned Oil and Natural Gas Corporation Limited (BSE:500312) (New Delhi), one of India's largest oil-producing companies, awarded only one large order in 2008-09 and is expected to invite tenders for more this fiscal year.

NTPC Limited (BSE:532555) (New Delhi), India's largest power producing company, and Damodar Valley Corporation (Kolkata, West Bengal) are also expected to initiate the bidding process for 11 power plants, each with capacities of 660 megawatts. L&T's joint venture with Mitsubishi Heavy Industries Limited (MHI) (TYO:7011) (Tokyo, Japan) is eyeing a considerable share of these projects to be awarded this year. In 2007, L&T formed a joint venture with MHI to manufacture supercritical equipment for the power sector in India. Any further projects will add to the company's order book for the current fiscal year but will contribute to profits and revenues only after 2011.

Order projections made by L&T are in stark contrast to a recent note released by Citigroup (NYSE:C) (New York, New York), which estimates a growth of 0-5% in orders for the 2009-10 fiscal year. Even if L&T fails to meet the 25-35% growth target, order inflows are expected to be in line or higher than the previous fiscal year.

L&T is diversifying to create capacities and expertise in various new sectors such as power equipment and railways that offer good potential for growth and long-term value. The company continues to focus on traditional sectors such as infrastructure and hydrocarbons. According to industry analysts, the quality of orders obtained by L&T will be better this fiscal year because of a lull in the real-estate sector. Engineering and construction sector projects contribute the most to the company's gross revenue, followed by electrical and electronics, and machinery and industrial products.

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