UPDATE 2-India L&T sees higher order inflow, Q2 net up 26 pct

* Q2 net 5.8 bln rupees matches consensus but revenue misses

* Ups order inflow guidance trims 09/10 rev growth target

* Order inflows bounce back, up 47 pct in quarter

* Shares slip, close down nearly 4 pct

* Expects govt spending on infrastructure to lift orders

(Recasts, adds quotes from news conference)

By Prashant Mehra

MUMBAI, Oct 22 (Reuters) - India's Larsen & Toubro (LART.BO) raised its guidance for order inflows this fiscal year as construction activity picks up in Asia's third largest economy, but said funding delays were still slowing some projects.

The country's largest engineering and construction company expects new orders to increase more than 30 percent for the year to March, up from its earlier forecast of 25 percent, but said revenue growth may slow to 15 percent from the earlier estimate of 15-20 percent.

The market reacted negatively to the trimming in revenue growth, and L&T shares slid the most in more than two months. L&T, which the market values at $21.7 billion, closed down 3.9 percent at 1,608.50 rupees in a Mumbai market .BSESN that fell 1.3 percent.

"Some jobs have seen delays in financial closure, and execution has started a few months late. There has also been impact on machinery and industrial products business," Chief Financial Officer Y.M.Deosthalee told reporters.

"But we are extremely optimistic in terms of business opportunities, and hopefully, will see much better growth in the second half," he added.

The company reported a rise in fresh orders and posted a 26 percent rise July-September quarterly net profit to 5.80 billion rupees ($124 million) on sales of 78.66 billion rupees

A Reuters poll of 10 brokerages had forecast net profit of 5.81 billion rupees, on net sales of 88.7 billion.

Despite the adverse market reaction, analysts said they remained positive on its growth prospects.

"The growth has come on account of the depressed numbers last year when this quarter was quite bad. Margins now seem to be far better," said Abhineet Anand, analyst at Antique Stock Broking.

"Going ahead, they have a very strong order book which should translate into higher revenues."

ORDER INFLOW BOUNCES BACK

L&T, which has gained from a construction boom over the past few years, said it had an order backlog of 816.2 billion rupees at the end of September.

New orders in the quarter were at 183.65 billion rupees, a 47 percent rise, it said compared with a 22 percent fall in the June quarter.

"The economy has started showing signs of recovery providing the much needed boost to the investment climate and spurring demand for capital goods," the firm said in a statement.

While the global financial crisis slowed the economy and pressured firms to scale back expansion plans, hurting the L&T's order inflows, the government's recent focus on boosting rural infrastructure and speeding up road construction has raised prospects for the sector.

Operating profit margins for its engineering and construction division, which contributes 80 percent of revenues, stayed at 11.3 percent, it said.

The company, whose diverse activities include shipbuilding and software, expects order flow to pick up from the infrastructure, power and hydrocarbon segments and sees its recently bolstered financial position helping to grab contracts.

"We are building up our engineering and construction capabilities. There are plenty of large jobs in the pipeline, and we expect results soon," Deosthalee said.

Earlier this month, the company raised $400 million through a share issue to qualified institutional buyers and another $200 million by issue of convertible debentures and said the funds would allow it to bid for large upcoming projects.[ID:nBOM161355] Shares in the company have more-than-doubled so far in 2009, outperforming the benchmark index .BSESN that has risen 76 percent in the same period. ($1=46.7 rupees) (Writing by Narayanan Somasundaram; Editing by Jarshad Kakkrakandy and Lincoln Feast)