Imagine a future where you can zip between Mumbai and Ahmedabad in less than two hours, experiencing unprecedented speed and comfort. This isn’t some faraway idea; it’s here and now, thanks to Larsen & Toubro (L&T).
L&T’s recent ‘mega’ contract for India’s bullet train project marks a pivotal moment in the nation’s infrastructure development. This article delves into the project’s intricacies, its impact on L&T’s financial landscape, and its significance for potential investors. Join us in uncovering the high-speed revolution shaping India’s infrastructure.
L&T news: It accelerates into the future
In a groundbreaking move, the bullet train initiative, also known as the Mumbai-Ahmedabad High-Speed Rail (MAHSR) Project, has awarded a massive “mega” contract to the renowned Indian multinational corporation Larsen & Toubro (L&T). Bringing in a new age of state-of-the-art rail infrastructure, this massive contract entails building a massive 508 route km of high-speed electrification system works.
The electrification system, a crucial facet of this venture, aims to propel trains at speeds of up to 320 kilometres per hour, advancing the vision of high-speed rail. Guided by the National High-Speed Rail Corporation Ltd. (NHSRCL) and funded by the Japan International Cooperation Agency (JICA), this visionary project signifies a significant cross-border collaboration.
While the exact value of the total expenditure remains undisclosed, the ‘mega’ designation implies a substantial range, typically between ₹10,000-15,000 crore. This strategic move cements L&T’s position as a pivotal player in the ambitious MAHSR Project, propelling them to the forefront of India’s high-speed rail journey.
L&T has continued to transform India’s rail landscape. L&T secured ₹15,697 crore for Package C-3, a 135.45 km stretch within the 508.17 km MAHSR Bullet Train project, alongside the ‘mega’ contract. This commitment continues with another significant contract valued at Rs. 2460.88 crore for constructing the 8.198 km Package C-5, cementing their integral role in driving the ambitious MAHSR Bullet Train initiative. These numbers not only underscore L&T’s financial prowess but also highlight their crucial role in propelling the future of high-speed rail travel in India.
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Past achievements
- The foundation stone for the project was laid by the Prime Ministers of India and Japan on September 14, 2017.
- The project has seen participation from several major companies. For instance, the Ahmedabad-Mumbai bullet train project’s multi-model Sabarmati terminal hub was bid upon by sixteen Indian companies.
- In the bullet train project, Tata Projects Ltd, Afcons Infrastructure Ltd, NCC Ltd, and the L&T-IHI Infrastructure Systems Consortium were among the bidders for respective packages.
- For the steel bridge order, L&T had already come out on top with the lowest bid. Bids for the bullet train project’s steel bridge order were opened for financial consideration on December 18, 2020.
- For the bullet train project, L&T is already carrying out civil viaduct and station packages (C4, C5, and C6), special steel bridge packages P4 (X) and P4 (Y), and ballastless track works.
L&T: A powerhouse of innovation and excellence
Larsen & Toubro (L&T) stands as a stalwart in India’s corporate landscape, recognised as a premier engineering and construction conglomerate. Founded in 1946, the company has evolved into a dynamic force, playing a pivotal role in shaping the nation’s infrastructure across various sectors.
L&T, a stalwart in engineering, construction, information technology, and financial services, boasts a diverse portfolio across various industries. The company has played a pivotal role in spearheading some of India’s most iconic projects, making substantial contributions to the country’s overall development.
L&T’s commitment to excellence transcends borders, marked by a global footprint featuring successful ventures and collaborations in diverse international markets. Renowned for its engineering prowess and unwavering dedication to quality, L&T stands as a trailblazer in innovation, sustainability, and technological advancement.
Rooted in its values, L&T is committed to fostering economic growth, environmental stewardship, and social responsibility. With a rich history and forward-looking approach, L&T leaves an indelible mark on India’s landscape, contributing significantly to global infrastructure advancement through its expertise in engineering and construction.
L&T’s financial health: A deep dive
Key financial ratios (March 2023)
| Particulars | March 2023 | March 2022 | March 2021 |
| Revenue (In ₹ Cr) | 114,535.93 | 104,613.06 | 90,615.77 |
| Basic EPS (₹) | 55.85 | 56.09 | 80.74 |
| Net profit margin (%) | 7.10 | 7.80 | 15.46 |
| Return on networth / Equity (%) | 10.97 | 11.74 | 18.76 |
| Return on capital employed (%) | 14.63 | 14.20 | 12.55 |
| Return on assets (%) | 4.55 | 4.67 | 7.66 |
| Total debt/Equity (X) | 0.25 | 0.30 | 0.39 |
| Asset turnover ratio (%) | 0.65 | 0.64 | 49.55 |
| Enterprise value (₹ Cr.) | 317,837.06 | 262,135.34 | 219,259.78 |
| Earnings yield | 0.03 | 0.03 | 0.06 |
The financial picture is not as strong as it was in previous years. There is a noticeable decline in several key financial ratios from March 2021 to March 2023, such as basic EPS, net profit margin, and return on assets.
However, the company still has a positive net profit margin of 7.10%, indicating profitability. The return on net worth/equity and return on capital employed percentages are also positive, showing effective management performance.
Additionally, the total debt/equity ratio is low at 0.25, indicating that the company is not heavily reliant on external debts.
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L&T share price
As of January 18, 2024, the share price of Larsen & Toubro (L&T) on the NSE was ₹ 3,612.85.
L&T Share prices have demonstrated consistent upward momentum, reflecting a sustained ascent in market valuation.
L&T Finance Holdings latest news
In a dynamic series, L&T Finance Holdings leads in financial innovation and community empowerment. A strategic collaboration with the Asian Development Bank (ADB) in a USD 125 million financing pact signals a key move to expand financial reach.
L&T Finance Holdings’ esteemed position in the financial landscape was highlighted when it was named the “Prestigious Brand of India” at the Goal Fest Conclave 2023. The PLANET app’s widespread success, surpassing 5 million downloads, underscores the company’s appeal to digital-savvy users.
Beyond traditional finance, L&T Finance initiates transformative projects like the Digital Sakhi initiative, reaching communities in Supaul, Bihar; Gorakhpur, Uttar Pradesh; and Murshidabad, West Bengal. The company’s dedication to supporting SMEs is evident in the substantial disbursement of over Rs. 400 crore in Gujarat within the first year.
Investing in L&T: A considered perspective
The recent ‘mega’ contract that L&T secured for the Mumbai-Ahmedabad High-Speed Rail (MAHSR) Project is a significant development for the company. This project not only enhances L&T’s portfolio but also demonstrates its technical prowess and execution capabilities.
For investors, this could signal potential growth and profitability in the future. The successful execution of this project could lead to an increase in L&T’s revenues and profits, which could positively impact its share price. Moreover, the project could strengthen L&T’s position in the infrastructure sector and open up opportunities for more such projects in the future.
Investors must consider the inherent risks associated with large-scale projects like the bullet train initiative. Potential dangers include cost overruns if the actual cost exceeds estimates, project delays due to logistical or technical issues leading to increased costs and revenue delays, and regulatory hurdles such as changes in laws impacting timelines and costs. These factors pose potential impacts on L&T’s financials.
Strengths of L&T
- Potential for increased revenues and profits
- Enhanced market position
- Future opportunities
Risks / Cons of investing in L&T
- Project risks (cost overruns, project delays, etc)
- Dependence on domestic operations
- Increasing debt
- Rising construction costs
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Bottomline
L&T’s recent ‘mega’ contract for the Mumbai-Ahmedabad High-Speed Rail (MAHSR) Project is a pivotal milestone, highlighting the company’s technical prowess and execution capabilities. This project not only enriches L&T’s portfolio but also signifies potential growth and profitability in the future.
Like any investment, L&T’s bullet train project comes with inherent risks. Investors must carefully assess these factors before deciding to invest. As the project unfolds, the impact on L&T’s financial trajectory and India’s infrastructure landscape will be intriguing to watch. Keep watching for further updates on this rapid voyage!
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