Larsen & Toubro Limited — Q2 FY25 earnings call

Call held 30 Oct 2024

Management summary

Larsen & Toubro reported a robust Q2 FY25 with strong revenue growth and improved profitability, driven by execution momentum in Projects and Manufacturing. The company's order book surpassed ₹5 trillion, supported by significant international orders, particularly in Infrastructure. While overall order inflows saw a slight Y-o-Y decline due to a high base, management remains optimistic about domestic ordering in H2 FY25 and maintains its full-year guidance across key financial metrics. Strategic initiatives in renewable energy, semiconductor design, and data centers are progressing, positioning L&T for future growth.

Highlights

  • Group revenues for Q2 FY25 stood at ₹616 billion, registering a strong Y-o-Y growth of 21%.

  • Consolidated PAT for Q2 FY25 was ₹34 billion, up 5% Y-o-Y (25% growth excluding non-recurring TOD monetization gain of ₹5.12 billion in Q2 FY24).

  • Group order inflows for Q2 FY25 were ₹800 billion, showing a sequential growth of 13% but a Y-o-Y decline of 10% due to a high base in the previous year.

  • The order book crossed a new milestone of ₹5.1 trillion as of September '24, up 13% Y-o-Y.

  • Net Working Capital to Revenue improved to 12.2% as of September '24, an improvement of 170 basis points sequentially and from 16.7% in September '23.

  • Cash flow from operations for Q2 FY25 more than doubled to ₹77 billion from ₹35 billion in Q2 FY24.

  • Trailing 12 months ROE for Q2 FY25 improved to 16.1%, up 140 basis points Y-o-Y and 80 basis points sequentially.

  • Infrastructure segment order inflows grew robustly by 77% Y-o-Y to ₹495 billion in Q2 FY25, with 63% from international orders.

What they filed

Q1 FY27: revenue up 7.6%, net profit up 27.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue34,919 34,984 42,329 33,471 35,116 +1%37,903 +8%47,191 +11%36,024 +8%
EBITDA2,952 2,883 3,758 2,391 2,320 −21%3,164 +10%4,691 +25%1,915 −20%
Net profit1,988 2,404 3,509 3,485 -3,591 −281%2,832 +18%3,561 +1%4,455 +28%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Capacity

  • Electrolyser Manufacturing Capacity Capacity · near to medium term · High confidence 500 megawatts
    Continuing with the electrolyzer factory expansion, the first automated robotic line for stack assembly with the capacity of 150 megawatts has been installed and commissioned successfully at our AM Naik Heavy Engineering Complex in Hazira in September '24. As mentioned earlier, we will ramp up the capacity to 500 megawatts in the near to medium term, followed by 1 gigawatts in the medium to long term.

    — P. Ramakrishnan

  • Electrolyser Manufacturing Capacity Capacity · medium to long term · High confidence 1 gigawatts

    — P. Ramakrishnan

  • Chennai Data Center Capacity Capacity · near term · High confidence 30 MW
    We have plans of scaling up the data center in Chennai to 30 MW in the near term.

    — P. Ramakrishnan

Order Inflow

  • Realty Development Order Inflows Order Inflow · FY26 · High confidence ₹8,000 crores
    In our group strategic plan that ends FY '26, we had targeted exit order inflows, that is FY '26 order inflows and revenues for the Realty Development business around Rs. 8,000 crores and Rs. 5,000 crore, respectively, for the year FY '26.

    — P. Ramakrishnan

  • Group Order Inflows Growth Order Inflow · FY25 · High confidence 10%
    Lastly, we continue to maintain our guidance for the current financial year around Group Order Inflows, Group Revenues, Margin in the Projects and Manufacturing portfolio, and Group Net Working Capital to Revenue. Just to recall, the guidance for Order Inflow was 10%, for the Group Revenues was 15%, the margins in and around the same for the margins for the P&M portfolio that we had printed for FY24 and the NWC to Revenue target around 15% as of March 25.

    — P. Ramakrishnan

  • Total Order Inflow Order Inflow · FY25 · High confidence ₹3,30,000 crores

    Previously ₹3,00,000 crores (FY24 actual) → ₹3,30,000 crores

    Last year, FY24, the actual order inflow that the company printed was Rs 3 lakh crores consolidated. And if you take a 10% guidance on growth, the FY25 guidance for total order inflow is Rs 3,30,000 crores.

    — P. Ramakrishnan

  • BTG Orders (Thermal Power) Order Inflow · within this quarter (Q3 FY25) · Medium confidence at least 4 gigawatt
    I mean you said it. I think we should know within this quarter where we reach on this. As far as the tender conditions, this 6.4 GW in three locations, the customer will award two packages of the bundle to L1 and third one could go to the L2 bidder if they are able to successfully conclude negotiations. We will have to see. But I think looks like that we will have at least 4 gigawatt if everything goes well.

    — Subramanian Sarma

Revenue

  • Realty Development Revenues Revenue · FY26 · High confidence ₹5,000 crore
    In our group strategic plan that ends FY '26, we had targeted exit order inflows, that is FY '26 order inflows and revenues for the Realty Development business around Rs. 8,000 crores and Rs. 5,000 crore, respectively, for the year FY '26.

    — P. Ramakrishnan

  • Group Revenues Growth Revenue · FY25 · High confidence 15%
    Lastly, we continue to maintain our guidance for the current financial year around Group Order Inflows, Group Revenues, Margin in the Projects and Manufacturing portfolio, and Group Net Working Capital to Revenue. Just to recall, the guidance for Order Inflow was 10%, for the Group Revenues was 15%, the margins in and around the same for the margins for the P&M portfolio that we had printed for FY24 and the NWC to Revenue target around 15% as of March 25.

    — P. Ramakrishnan

Growth

  • Realty Development Order Inflow and Revenue Growth (from FY26 exit trajectory) Growth · beyond FY26 · Medium confidence three to four times growth
    Whereas it will be difficult to comment on the period beyond FY 26, I would like to mention here that we possibly target around three to four times growth on order inflow and revenue from our exit trajectory in FY '26.

    — P. Ramakrishnan

Margin

  • Projects and Manufacturing Portfolio Margins Margin · FY25 · High confidence 8.2% to 8.25%
    I would like to maintain that the margin guidance that we have given at the start of the financial year with respect to the P&M portfolio at 8.2% to 8.25% still holds good.

    — P. Ramakrishnan

Working Capital

  • Net Working Capital to Revenue Working Capital · March 25 · High confidence around 15%
    Lastly, we continue to maintain our guidance for the current financial year around Group Order Inflows, Group Revenues, Margin in the Projects and Manufacturing portfolio, and Group Net Working Capital to Revenue. Just to recall, the guidance for Order Inflow was 10%, for the Group Revenues was 15%, the margins in and around the same for the margins for the P&M portfolio that we had printed for FY24 and the NWC to Revenue target around 15% as of March 25.

    — P. Ramakrishnan

2 min read

Detailed narrative

Larsen & Toubro delivered a robust financial performance in Q2 FY25, with group revenues reaching ₹616 billion, marking a strong 21% year-on-year growth. This was primarily fueled by significant execution momentum across the Projects and Manufacturing portfolio, which saw its revenue increase by 28% to ₹445 billion. The consolidated PAT for the quarter stood at ₹34 billion, a 5% increase over Q2 FY24. Excluding a non-recurring Transit Oriented Development (TOD) monetization gain of ₹5.12 billion in the previous year, the PAT growth was a more substantial 25%. The group's EBITDA margin (excluding other income) was 10.3%, while the Projects and Manufacturing business achieved a 7.6% margin, up 20 basis points from the prior year.

Order inflows for Q2 FY25 were ₹800 billion, reflecting a 13% sequential growth, though a 10% year-on-year decline due to a high base from ultra-mega international orders in the previous year. Despite this, the company's order book reached a new milestone of ₹5.1 trillion as of September '24, growing 13% year-on-year. The domestic order book constitutes 60% (₹3.05 trillion) and international 40% (₹2.05 trillion), with 85% of international orders originating from the Middle East. The Infrastructure segment was a key driver, securing ₹495 billion in orders, a 77% year-on-year growth, with 63% from international markets. The Energy Projects segment also saw healthy revenue growth of 31% to ₹89 billion, primarily from international hydrocarbon projects.

Strategically, L&T has carved out a separate Renewable Energy business vertical and is expanding its electrolyser manufacturing capacity to 500 megawatts in the near term, with plans to reach 1 gigawatt in the medium to long term. The company is also making strides in semiconductor design through LTSCT, which recently acquired SiliConch Systems Private Limited and inaugurated a new development center. In the data center business, a 2 MW facility in Panvel is nearing commissioning, and plans are underway to scale the Chennai data center to 30 MW. The Real Estate development business targets ₹8,000 crores in order inflows and ₹5,000 crores in revenues by FY26, with aspirations for three to four times growth beyond that.

Management reiterated its full-year FY25 guidance: 10% growth in group order inflows, 15% growth in group revenues, Projects and Manufacturing portfolio margins of 8.2% to 8.25%, and Net Working Capital to Revenue around 15% by March 2025. They expressed optimism for a stronger domestic ordering environment in H2 FY25, citing a robust prospect pipeline of ₹8.08 trillion. While acknowledging global geopolitical uncertainties and Red Sea disruptions, L&T remains confident in India's economic resilience and the continued investment focus in the Middle East. The company's focus on profitable growth, timely execution, and strong cash flows, with cash flow from operations more than doubling to ₹77 billion, contributed to an improved trailing 12-month ROE of 16.1%.

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