Execution challenges may weigh on L&T's growth prospects

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₹5,615 crore in the June quarter (Q1FY25), slightly above Street estimates. Profitability was led by robust execution of international projects, while domestic ones remained subdued. The strong pipeline of orders worth ₹4.9 trillion – three times the trailing 12 months revenue of L&T’s core projects & manufacturing (P&M) business – should aid the growth momentum.

L&T has maintained the order inflow growth guidance of its P&M business at 10% year-on-year for FY25. In Q1FY25, P&M order inflow growth stood at 8%, backed by satisfactory growth in energy and hi-tech manufacturing. Also read: Is Axis Bank's share price fall a knee-jerk reaction? It’s worth noting here that the order prospects pipeline for the rest of this financial year has dropped to ₹9.07 trillion, which is 10% lower year-on-year.

This is primarily due to a fall in the hydrocarbon prospects pipeline. The company was unable to secure some tenders, while other projects were deferred or shelved. Against the backdrop, analysts at InCred Research Services said, “L&T is likely to miss its 10% order inflow growth guidance for FY25F mainly due to lower international order inflow." The broking firm lowered its profit-after-tax estimates by 2.3% for FY25 and 5.8% for FY26, mainly due to lower order inflows and revenue.

The order backlog of ₹4.9 trillion was 20% higher than a year ago, with domestic orders accounting for ₹3 trillion and international orders ₹1.9 trillion. Execution in the domestic business during the quarter was affected by labour shortages on account of the general elections. A large chunk of L&T domestic order book comprises orders from the union government, state governments and public sector units.