Mumbai, Jun 5 (PTI) Engineering major Larsen & Toubro (L&T) CEO and Managing Director S N Subrahmanyan on Friday said the company is reworking its budget and operations as the previous plans have become invalid due to the COVID-19 induced uncertainties.
The company, which currently has projects across 950 sites both in domestic and international markets, is also expecting more government orders to be awarded in the current fiscal as the private sector capex will take another one-and-a-half years to revive.
'Indian economy has been struck by the coronavirus pandemic at a time when some green shoots of economic recovery were being forecasted after a prolonged bout of growth slowdown. The situation is going to be tough this year.
'We have a budget but that is not valid anymore. We have to also rework it and that process is on. We still don't know where the pandemic is going...we are still in the red, orange and green zones as the lockdown continues. 'While some states are not allowing labourers to come in, some are not allowing them to go out. So there is no point in making any forecast at this point. It's a matter of time to let the dust settle down...we will then be able to give a forecast,' Subrahmanyan said during a media conference call.
The company reported a 4.36 per cent decline in net profit for the March quarter at Rs 3,430 crore as against Rs 3,586 crore earlier. Total income for the quarter increased to Rs 44,905.76 crore from Rs 43,914.37 crore in Q4 FY2019.
'Since there was no activity in the latter part of March and the whole of April and May were difficult, the company has missed sales of nearly Rs 13,000-15,000 crore out of over Rs 1.1 lakh crore expected.
'Therefore we have done a detailed planning of how to catch up with the situation, where the supply chain has got disrupted, labour availability is an issue. A series of actions are being taken to get back into action,' he said.
These measures include building sufficient liquidity on the balance sheet, adapting business models to incorporate work-at-home practices wherever feasible, optimising digital initiatives, sharply focusing on all items of cost to maximise economic benefits and taking care of the large subcontracted labour force at work sites.
L&T bagged orders worth Rs 186,356 crore at the group level during the year ended March 2020, registering growth of 9 per cent compared to the previous year, even in the face of subdued business environment and economic challenges. 'The private sector capex has been low, but last year we saw some orders coming in, especially in the power transmission and distribution, airports and some contracts in the real estate sector.
'However, I don't see the private sector revival at the moment, even as there will be a few contracts coming, but they would not be significant,' he said.
However, in the international market, the company is expecting some capital expenditure (capex) from big oil companies in the Middle East.
Subrahmanyan further said that to a large extent the construction industry is going to be dependent on projects from state and Central governments which are largely funded by the multilateral institutions.
'Though the capex of certain state governments has come down to some extent due to the COVID situation, we believe that there will be some capex for major projects. Also, state projects which are backed by multilateral funding will also be awarded,' he added.
On mass migration of labourers, Subrahmanyan said, 'In the pre-COVID period, we had more than 2.2 lakh labourers across our almost 950 project sites, but today we have around 1.2 lakh working. While some labourers who had left during Holi have not yet returned, some have left because of psychological pressures, may be due to pandemic or seeing others leave.' 'Indians are generally self respecting for earning and so we feel once things normalise they will come back. It's a time of another 20-30 days,' he said.
He also said the company's factories at Coimbatore, Ahmedabad, Kattupalli and Baroda, among others, have resumed operations and 60-70 per cent of the workers are back. PTI PSK ABM ABM