In April, management guided toward revenue growth of 15-20% and order inflow of 25–30% for F2010. Management expressed confidence that it could meet guidance. We believe that with recent big-ticket order wins from ONGC and in the power arena, and the bulk tender (from NTPC) expected in this financial year, the company should be able to beat F2010 guidance.
With funding concerns being resolved (though the liquidity increase globally and IIFCL in particular for India) and the new government keen to demonstrate performance, L&T has seen an improvement in the macro environment in the form of improving regulatory framework, especially for the road and power sectors. The government has made efforts to facilitate and encourage private sector investment.
L&T intends to actively participate in the next round of bidding from the NHAI on both the EPC and the BOT projects. In the Hydrocarbon sector, while activity in the Middle East is only just beginning to pick up, L&T’s major client, ONGC, is moving forward with its plans in full swing. L&T expects to capture a few more orders from ONGC. Hence, it sees potential and opportunity across all its verticals (Exhibit 1) via Infrastructure, Power, Process and Hydrocarbons and expects orders to start flowing in over the coming few months.
Value unlocking plans: L&T will continue to invest in its core business subsidiaries like the BTG (Boiler Turbine Generator) subsidiary and L&T IDPL, and continue to exit its non-core business like RMC Cement, and other. At an appropriate time, L&T plans to unlock value in its three key subsidiaries – L&T Finance, L&T Infotech and L&T IDPL – in that order. The company does not plan to commit any further capital in L&T Finance and expects to meet L&T Finance’s future capital requirement through listing or merger. For L&T IDPL, the company may review its portfolio from time to time and may consider consolidating its assets and listing it over the next 3-5
years.