Short-Term Oil Price Fluctuations Don’t Affect Order Flows From West Asia: L&T | CNBC TV18

Summary

The transcript captures an insightful discussion with Mr. Subraman Sharma, Deputy Managing Director of Larsen & Toubro (L&T), on the company's energy vertical and its prospects. Despite the challenges posed by fluctuating crude oil prices, Sharma remains optimistic about L&T’s order inflows, especially in the Middle East, due to their focus on essential and high-priority projects. He also discusses the potential growth in India’s energy sector, particularly in transmission, nuclear, and green hydrogen projects. Overall, L&T is set to maintain its growth trajectory through diversified projects and strategic international expansion.

Takeaways

• 😀 L&T reported an 18% revenue growth and an 18% order inflow growth in Q4, exceeding their initial guidance of 15% and 10% respectively.
• 😀 For FY26, L&T expects a 15% revenue growth, improved margins, and a 10% increase in order inflows.
• 😀 Crude prices under $70 may affect Middle Eastern orders, but essential and high-priority projects, like oil & gas and renewable power, are expected to continue despite this fluctuation.
• 😀 L&T’s energy order inflow in FY25 was 19%, with analysts expecting even better growth in FY26, particularly in the Middle Eastern market.
• 😀 L&T’s diverse presence in the Middle East (including countries like Kuwait, Qatar, and UAE) positions them well for continued energy-related project growth.
• 😀 The domestic Indian energy sector remains positive, with increasing demand for power, nuclear energy, and grid stability projects.
• 😀 The Indian government’s push for carbon neutrality by 2070 could drive further demand for nuclear energy and cleaner energy sources.
• 😀 L&T is optimistic about growing its participation in nuclear energy projects, especially with a potential increase in nuclear capacity in India by 2045.
• 😀 L&T is also involved in green hydrogen projects, including a significant project with IOCL for the Indian refinery sector, with international expansion seen in markets like Korea, Japan, and the Far East.
• 😀 The marine industry is expected to be a key sector for L&T in green hydrogen, with green ammonia applications being particularly promising due to carbon taxes and high demand.
• 😀 L&T remains positive about the Hyderabad metro monetization process, with increased footfall and discussions with investors for property sales helping to reduce debt and reach break-even.

Q & A

What was the reported growth in revenues and order inflow for L&T's fourth quarter?

L&T reported an 18% growth in revenues and an 18% growth in order inflows, exceeding their initial guidance of 15% and 10% respectively.

How has L&T projected its growth for FY26 in terms of revenue and order inflows?

For FY26, L&T has guided a 15% growth in revenues and a 10% growth in order inflows.

What impact do fluctuations in crude oil prices have on L&T's orders in the Middle East?

Fluctuations in crude oil prices do not significantly impact L&T's orders in the Middle East, as most projects are long-term, with non-priority projects being delayed or canceled when prices drop.

Which sectors does L&T focus on in the Middle East, and how does this affect their order inflow?

L&T focuses on high-priority sectors like oil and gas, particularly gas, and renewable power. These are essential projects that are less affected by short-term oil price changes.

What is L&T's forecast for energy order inflows for FY26?

L&T is optimistic about the energy order inflows and expects continued growth, with a diversified presence in the Middle East, including countries like Saudi Arabia, Kuwait, Qatar, and UAE.

How does the energy sector in India look for L&T in terms of orders and growth opportunities?

The energy sector in India looks positive, with growing energy demand, especially in thermal power plants, and increased interest in nuclear energy. L&T is also seeing opportunities in transmission and distribution projects.

What role does nuclear energy play in L&T's future plans for the Indian market?

Nuclear energy will play a significant role in India's transition towards cleaner energy sources. The government aims for carbon neutrality by 2070, and L&T is positioning itself to be a key player in nuclear energy production, aiming for 100 GW by 2045.

What is L&T's involvement in green hydrogen projects, and what are the key markets?

L&T is actively participating in green hydrogen projects, such as the one for Indian Oil Corporation Limited (IOCL) in Panipat. The company is also involved in international projects in countries like Korea, Japan, and in the marine industry, where green ammonia applications are expected to grow.

What challenges does L&T face in the nuclear sector, and how are they addressing them?

L&T faces challenges related to civil liability issues in the nuclear sector, but once legal amendments are made, the company expects a significant number of nuclear energy projects to come online.

What is the current status of L&T's Hyderabad metro project, particularly regarding its monetization?

The footfalls in Hyderabad metro have been increasing, and the company is optimistic about reaching break-even in the coming years. L&T is also exploring monetization opportunities through real estate and discussions with potential investors.