MUMBAI (NewsRise) -- Larsen & Toubro reported a better-than-expected a more than 13% increase in second-quarter net profit, as a growing information technology business helped India's largest engineering and construction company sidestep the investment slowdown at home.
India's $2.9 trillion economy has been contending with slowing demand for automobiles and other consumer products as banks tightened credit amid surging bad debt. The liquidity crunch hobbled the pace of spending on infrastructure in Asia's third-largest economy, driving it into a slow lane.
Still, L&T has been sailing through on the back of a diversified exposure to geographies and sectors, including metro rail construction and hydrocarbon and a list of infrastructure projects in the Middle East.
Mumbai-based L&T's consolidated profit for the quarter ended in September stood at 25.3 billion rupees ($356 million). Analysts had expected the company to report a profit of 20.99 billion rupees, according to Refinitiv data.
The latest quarter included 19.14 billion rupees in revenue from the consolidation of Mindtree, a software company in which it acquired a majority stake earlier this year. Revenue from IT services business jumped 64% in the quarter.
The quarter also saw tax expenses fall 3.2%, aided by the government's move in September to cut headline corporate taxes by eight percentage points to 22%.
Revenue grew about 15% to 353.28 billion rupees. As of March 31, the company had orders worth 3.03 trillion rupees, with international contracts accounting for 22% of the total orders.
"The last few months has seen a noticeable contraction in economic activity, mainly centered around private consumption and industrial capital expenditure," L&T said in a statement. "To a large extent, public sector spending in the areas of core infrastructure stayed the course albeit with time delay for award."
L&T said it is relying on the "robust order book, strong balance sheet, diversified business portfolio and execution capabilities" to tide over the current volatile and challenging economic environment.
The company said it continues to expect to grow its order book by 10% to 12% this fiscal year. It had previously forecast its revenue to grow 12% to 15% this year.
L&T received fresh orders worth 482.9 billion rupees during the quarter. Infrastructure services, the largest revenue-generating segment, saw a 33% decline in revenue, hurt by bid deferrals and delays in finalization of orders, it said.
Over the past few years, L&T has been trying to deleverage its balance sheet and improve returns by exiting non-core businesses. In May last year, it sold electrical and automation unit to Schneider Electric and Singapore's Temasek.
In 2016, L&T had set an ambitious target to achieve revenue of 2 trillion rupees by the fiscal year 2021, and an order inflow of more than 2.5 trillion rupees per year. It is relying on the faster pace of expansion in the technology and financial services businesses to offset slowing growth in its core infrastructure business.
Shares of L&T lost 0.8% in Mumbai trading on Wednesday, before the earnings were released, while the benchmark S&P BSE Sensex closed 0.2% higher.
--Dhanya Ann Thoppil