📢 5 STEPS TOWARDS WEALTH 🚀 The Indian Stock Market Way
India Ratings Affirms Larsen & Toubro’s NCDs at ‘IND AAA’/Stable
1. Credit Ratings: 📊
Non-Convertible Debentures (NCDs): Rated 'IND AAA/Stable', reflecting strong creditworthiness.
Commercial Papers (CPs): Rated 'IND A1+', indicating the highest degree of safety for short-term obligations.
2. Operational Performance: 🚀
Revenue Growth: Consolidated revenue grew to ₹1,092 billion for 1HFY25, up from ₹2,080 billion in FY24 and ₹1,708 billion in FY23, showcasing a strong upward trend.
EBITDA Margins: Stable at 10%-11%, supported by operational efficiency across segments.
3. Segmental Revenue Contributions: 🏗️📡⚡
Infrastructure: ~50% of revenue.
Services: ~26%.
Energy: ~15%.
IT & Technology: Stable EBITDA contribution (~42%-46%).
4. Order Book Strength: 📜
Robust order book of ₹5,104 billion as of 1HFY25, with ~55% of new orders from international markets.
~70% of orders include price variation clauses, mitigating commodity risks.
Diversification of domestic orders across government, public sector, and private entities.
5. Liquidity and Financial Health: 💰
Strong liquidity with ₹336 billion in unencumbered cash and equivalents.
Low net leverage (0.1x-0.3x), indicating financial stability and capacity for future expansions.
Interest coverage of 6.1x for 1HFY25, showcasing robust debt-servicing ability.
6. Challenges: ⚠️
Moderately Long Working Capital Cycle: Improved to 12% of revenue in FY24, but still requires attention.
Marginal reduction in margins in infrastructure and energy segments due to slower project execution and contractual factors.
7. Growth Outlook: 🌟
Revenue expected to grow at 8%-10% YoY in FY25-FY26.
Continued focus on international and renewable energy projects drives optimism.
8. Risk Factors: ❗
Increased support for large projects like Hyderabad Metro or unforeseen profitability declines could impact ratings negatively.
Potential geopolitical risks in international projects.
9. Sustainability: 🌱
ESG factors have minimal credit impact, with no major risks reported.
Impact on Investment for Investors:
1. Positive Investment Outlook: ✅
Fixed-Income Investors: Strong credit ratings and financial health indicate low default risk and stable returns.
Equity Investors: Diversified revenue streams and robust order book ensure stable earnings.
2. Growth Potential: 📈
Domestic and international revenue growth supports long-term bullish investment.
Stable margins in IT and high-performing segments boost profitability.
3. Risk Mitigation: 🛡️
Price variation clauses in the order book protect against commodity price volatility.
Strong liquidity and low leverage provide resilience against uncertainties.
4. Key Considerations for Equity Investors: 🔍
Watch for working capital dynamics and execution delays in large projects.
Monitor regulatory and geopolitical risks for international operations.
5. Strategic Opportunities: 🌍
Renewable energy focus aligns with global sustainability trends.
Global footprint offers resilience against regional economic downturns.
Conclusion: 💡 L&T remains a robust investment opportunity with a well-balanced risk-return profile. Its operational and financial strength, combined with diversified revenue streams and strong order book, ensures sustained growth potential. Monitoring working capital and large project execution is essential for minimizing risks.
