L&T sharply scales down growth outlook to 5%

22 Oct 2011

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Engineering and construction group Larsen & Toubro (L&T) on Friday surprised market watchers as it sharply cut its order-book growth outlook to 5 per cent from the earlier growth guidance of 15-20 per cent it had projected at the beginning of this fiscal, citing a slowdown in investment momentum and cut-throat competition for orders.

It also projected lower margins as the slowing economy, inflation and high interest rates are expected to take their toll on the $12-billion Rs58,700 crore) company.

R Shankar RamanR Shankar Raman, chief financial officer, L&T said the reassessment was necessitated as decisions related to new projects were being deferred. ''At the moment, our best guess is that the conditions are going to remain as challenging as they are today and it is quite likely that the growth will be around 5 per cent rather than the 15 per cent targeted earlier,'' he said.

He said the engineering and construction industry has seen a considerable slowdown in investment momentum in the last six to eight months. Fewer projects are coming up, and these are seeing fierce bidding.

"Investment sentiment is low, leading to deferral of projects. Orders are few and far between, leading to heightened competition resulting in lower strike rate in getting orders. As a result, win rates are dropping for all the participants in the sector and L&T is no exception.

''Considering this situation and the policy initiatives that are required to be taken to fast-track some investment programmes and the confidence that has to be re-found in the business community, we do think we will lose much of the remaining six months in this process of discovery,'' said Raman.

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