L&T share price falls 5% as Q2 net profit plunges 45%; special dividend fails to cheer investors 

Larsen & Toubro Ltd (L&T) share price fell nearly 5 per cent to Rs 935.55 apiece on BSE, a day after the company reported a 45 per cent on-year decline in its consolidated net profit to Rs 1,410 crore in the July-September quarter. The stock was the top Sensex loser in the early morning trade today. In fact, the company’s announcement of a special dividend of Rs 18 per equity share failed to cheer up the market. “Volumes are just beginning to pick up, it has not reached its pre-Covid peak in terms of momentum and I think the EBITDA will improve in line with the improvement in volume lines,” said R Shankar Raman, chief financial officer, L&T.

According to the analysts at Motilal Oswal Financial Services L&T’s reported PAT increased 118 per cent on-year to Rs 5,520 crore, but was 52 per cent below expectation, largely on account of a miss in adjusted PAT and impairment in Forgings and Power Development. The brokerage firm has maintained its buy rating to the stock post Q2 earnings.

The company reported an exceptional gain of Rs 3,919 crore on the sale of the electrical business to Schneider Electric, which led to an overall consolidated net profit of Rs 5,520 crore. Raman added saying that the second quarter of the current fiscal has been representing a road to revival from the dips of the April-June quarter.

Research and brokerage firm Edelweiss has also recommended to buy Larsen & Toubro stock post-Jul-Sep quarter results. It said that the Indian economy is witnessing signs of revival with sectors such as Water, Power T&D, Metro/RRTS, Railways, Roads and Expressways witnessing increased traction. On the global front, the outlook on economic recovery remains uncertain with the resurgence of Covid in parts of Europe and US Presidential elections.

Larsen & Toubro revenues and EBITDA declined 12 per cent and 17 per cent on-year. Core E&C revenues declined by 17 per cent on-year with EBITDA margins declining 170bps on-year to 8.1 per cent. Order inflow (ex-services) declined 54 per cent on-year to Rs 17,300 crore. “Low special dividend (INR 18), sharp write-offs (forgings/power utilities) and weaker core (execution, OPMs) are key disappointments,” the brokerage firm added.