Group Performance for the quarter ended June 30, 2018

Consolidated Results
Robust growth registered: Order Inflow 37%; Revenue 18% & Overall PAT 36%

Mumbai, July 25, 2018: Larsen & Toubro recorded Consolidated Gross Revenue of ₹28,283 crore for the quarter ended June 30, 2018, registering a growth of 18% on a y-o-y basis with pick up of execution momentum in project businesses, robust growth in services business and recognition of revenue on completed performances in Realty business under the newly introduced accounting standard for revenue recognition (IND AS 115). International revenue during the quarter at ₹9,669 crore constituted 34% of the total revenue in line with previous year.

Consolidated Profit After Tax (PAT) for the quarter ended June 30, 2018 at ₹1,215 crore was higher by 36% vis--vis PAT of ₹893 crore for the corresponding quarter of the previous year.

The Company won new orders worth ₹6,142 crore at the group level during the quarter ended June 30, 2018, recording a growth of 37%, with pick-up in domestic ordering activity during the quarter. International orders at ₹9,404 crore constituted 26% of the total order inflow. Infrastructure, Hydrocarbon and Heavy Engineering businesses largely contributed to the growth in order inflows during the quarter.

The Consolidated Order Book stood at ₹271,732 crore as at June 30, 2018. International Order Book constituted 23% of the total Order Book.

Infrastructure Segment

Metallurgical and Material Handling (MMH) business, which was reported under ❝Others❞ Segment last year, has now been reclassified under the Infrastructure Segment. Accordingly previous year figures are regrouped wherever necessary.

Infrastructure segment secured orders of ₹19,395 crore during the quarter ended June 30, 2018 registering a smart increase of 16% on a y-o-y basis. The growth was mainly driven by turnkey projects awarded for Rural Water supply & Lift irrigation schemes in the Water & Effluent Treatment business. International orders contributed to around 23% of the total order inflow of the segment during the quarter.

The Order Book of the Segment stood at ₹210,599 crore as at June 30, 2018

Infrastructure Segment achieved customer revenue of ₹12,135 crore for the quarter ended June 30, 2018, registering an increase of 9%. International revenue constituted 31% of the total customer revenue of the segment during the quarter.

The segment recorded EBITDA margin at 6.8% during the quarter ended June 30, 2018 vis--vis 7.1% recorded in the corresponding quarter of the previous year. Decline in margins reflected the phase & mix of jobs under execution & Expected Credit Loss provisions on contract assets under the newly introduced accounting norms.

Power Segment

Muted order inflow of ₹108 crore recorded by the Power segment during the quarter ended June 30, 2018 is indicative of over-capacity and aggressive competition in the sector. The segment continues to face business headwinds with intense competition bidding for the limited opportunities on offer in a challenging environment.

The Order Book of the Segment stood at ₹8,051 crore as on June 30, 2018

Power Segment recorded customer revenue of ₹1,080 crore during the quarter ended June 30, 2018, registering a y-o-y decrease of 39% on a depleting order book. International revenue constituted 33% of the total customer revenue of the segment during the quarter vis--vis 12% in the corresponding period of previous year with pick-up in execution momentum in a Bangladesh project.

The segment EBITDA margin for the quarter ended June 30, 2018 was higher at 4.1% vis--vis 1.3% recorded in the corresponding quarter of the previous year on reversal of Expected Credit Loss provisions due to better collection of overdue receivables. Margins in this business are reflective of the competitive environment.

Heavy Engineering Segment

Beginning from this quarter, the operations of Heavy Engineering segment, have been segregated into different segments viz.Heavy Engineering Segment & Defence Engineering Segment based on internal re-structuring. Accordingly previous year figures have been regrouped, wherever necessary.

Heavy Engineering segment comprises manufacture and supply of custom designed, engineered critical equipment & systems to core sector industries like Fertiliser, Refinery, Petrochemical, Chemical, Oil & Gas, Thermal & Nuclear Power.

Heavy Engineering Segment secured fresh orders valued ₹1,409 crore during the quarter ended June 30, 2018, recording a significant y-o-y increase over a low base. International orders constituted 92% of the total order inflow of the segment during the quarter, mainly driven by buoyancy of activity in Oil & Gas sector.

The Order Book of the Segment stood at ₹4,055 crore as on June 30, 2018.

The Segment recorded customer revenue of ₹334 crore registering a growth of 26% over the corresponding quarter of the previous year. International revenue constituted 46% of the total customer revenue of the segment.

The EBITDA margin of the segment improved to 36.1% for the quarter ended June 30, 2018 vis--vis 12.3% recorded in the corresponding quarter of the previous year driven by efficient execution of orders on hand and on reversal of Expected Credit Loss provisions on contract assets due to improved Working Capital management.

Defence Engineering Segment

The newly introduced ߵDefence Engineerinߴ segment comprises Defence and Aerospace business (part of Heavy Engineering Segment till end-FY 2017-18) & Ship building business (part of ❝Others❞ segment till end-FY 2017-18). Accordingly previous year figures have been regrouped wherever necessary.

The Order Book of the Segment stood at ₹11,599 crore as on June 30, 2018.

Defence Engineering Segment recorded customer revenue of ₹727 crore registering an increase of 34% over the corresponding quarter of the previous year with progress on projects under execution. International Revenue constituted 11.1% of the total customer revenue of the segment.

The EBITDA margin of the segment stood at 11.1% for the quarter ended June 30, 2018 vis--vis negative margins during the corresponding quarter of the previous year which included inventory write down in Shipbuilding business.

Electrical & Automation (E&A) Segment

The Order Book of the E&A Segment registered a y-o-y. increase of 12% and stood at ₹3,061 crore as on June 30, 2018.

The Segment recorded customer revenue of ₹1,279 crore during the quarter ended June 30, 2018, registering a y-o-y increase of 6%. Adjusted for Excise Duty (subsumed within GST from 1st July, 2017), like-to-like revenues for the quarter grew by 13% on y-o-y basis. International Revenue constituted 26% of the total customer revenue of the segment for the quarter ended June 30, 2018.

The EBITDA margin of the E&A Segment stood at 13.3% for the quarter ended June 30, 2018, recording increase over 10.3% y-o-y on the back of operational efficiencies and favourable product mix.

Hydrocarbon Segment

Hydrocarbon Segment recorded an order inflow of ₹4,785 crore during the quarter ended June 30, 2018, mainly driven by receipt of orders from the fertiliser sector.

The Order Book of the Segment registered a y-o-y growth of 23% and stood at ₹28,377 crore as on June 30, 2018.

Revenues for the segment stood at ₹3,511 crore registering a significant growth of 38% over the corresponding quarter of the previous year at ₹2,546 crore, on the back of a robust order book. International revenue constituted 53% of the total customer revenue of the segment for the quarter ended June 30, 2018.

The EBITDA margin of the segment was at 7.0% for the quarter ended June 30, 2018 vis--vis 6.8% recorded in the corresponding quarter of the previous year.

IT & Technology Services (IT&TS) Segment

IT & Technology Services Segment achieved customer revenue of ₹3,324 crore during the quarter ended June 30, 2018, registering a y-o-y growth of 31%. International Revenue constituted 93% of the total customer revenue of the segment for the quarter ended June 30, 2018. Focus on digital technologies has been aiding growth in this segment and an array of business verticals have contributed to the strong growth (BFS, CPG, retail & pharma and Hi-Tech, media & entertainment in L&T Infotech group and Telecom & Hi-tech, Transportation and Process verticals in L&T Technology Services group).

The EBITDA margin of the IT&TS Segment at 24.8% for the quarter ended June 30, 2018 reflect improvement vis--vis corresponding quarter of the previous year at 21.5% driven by operational efficiencies.

Financial Services Segment

Financial Services Segment recorded customer revenue of ₹3,058 crore during the quarter ended June 30, 2018, registering a y-o-y growth of 33%, driven by growth in loan assets and disbursements in the focused business verticals of Rural and Housing Finance. Assets managed by Investment and Wealth Management businesses registered a sharp rise on healthy inflows.

The operating margin of the Financial Services Segment for the quarter ended June 30, 2018 at 24.2% increased over 16.2% earned during the corresponding quarter of the previous year.

The segment transitioned to IND AS with effect from 1st April, 2018 and has adopted strong governance norms on asset provisioning.

Developmental Projects Segment

Developmental Projects Segment registered customer revenue of ₹1,494 crore during the quarter ended June 30, 2018, vis--vis ₹827 crore recorded in the corresponding quarter of the previous year. Revenue includes divestment & transfer of ownership in Kattupalli Port during the quarter.

The EBITDA margin of the Developmental Projects Segment including gain on divestment of Kattupalli port operations for the quarter ended June 30, 2018 stood at 30.4%.

During the quarter, the segment successfully monetized 5 toll road projects by transferring them to an investment trust.

❝Others❞ Segment

❝Others❞ segment comprises Realty, Construction & Mining Equipment and Industrial Machinery & Products and Valves businesses.

Customer Revenue during the quarter ended June 30, 2018 at ₹1,341 crore, registered an increase of 46% over the corresponding quarter of the previous year, mainly from adoption of new accounting norms under IND AS 115 for Realty business whereby revenue is now being recognized on completed contract method. International Revenue constituted 4% of the total customer revenue of the segment.

Margins for the quarter were affected by provisioning for a disputed project in Realty business

Outlook

Domestic market which witnessed some short term disruptions on implementation of reforms like RERA, GST, Demonetisation, is gathering investment momentum. Though private sector investment is still muted, Government is focused on development of infrastructure and energy facilities to enable healthy and sustainable economic growth. Rural reforms continue to get priority attention, with larger allocations towards irrigation measures, rural road connectivity and last mile rural electrification. The momentum is expected to continue despite macro economic volatility due to oil prices, currency and potential global tariff barrier conflicts. The recent surge in oil prices is, however, expected to incentivize infrastructure and hydrocarbon capex in the Middle East region.

Growth in tax revenues is giving the Government the wherewithal to focus on improving infrastructure. Public sector spending by the Central Government, State Governments and Public Sector Undertakings, aided by increased funding by bi-lateral and multi-lateral agencies are leading to building of essential infrastructure. Progress on resolution of stressed private sector corporates through the Insolvency & Bankruptcy Code is expected to resolve the issue of overleveraged businesses and kick-start the flow of banking sector credit growth.

Amidst this backdrop, the Company continues to focus on profitable execution of its large Order Book, continuous improvement of working capital & cost competitiveness. The Company has a robust prospect base and is confident of sustaining its growth momentum by utilizing the emerging opportunities, with an aim at improving shareholder returns on a sustainable basis.

Background

Larsen & Toubro is an Indian multinational engaged in technology, engineering, construction, manufacturing and financial services with USD 18 billion in revenue. It operates in over 30 countries worldwide. A strong, customer-focused approach and the constant quest for top-class quality have enabled L&T to attain and sustain leadership in its major lines of business for over seven decades.

STATEMENT OF CONSOLIDATED UNAUDITED FINANCIAL RESULTS FOR THE QUARTER ENDED JUNE 30, 2018

Consolidated Unaudited segment-wise Revenue, Result, Total assets and Total liabilities in terms of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended: