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NEW DELHI/MUMBAI May 22 Larsen and Toubro Ltd
, India's largest engineering and construction group,
will look overseas to offset a weak economy and project
bottlenecks at home that led to a bigger-than-expected profit
Shares in L&T closed down nearly 6 percent after the
Mumbai-based company's profit fell 6.9 percent for the fiscal
fourth-quarter ending March, as its margins narrowed and
existing infrastructure projects struggled to get off the
The share drop was L&T's biggest since January 2010,
underscoring worries about the state of India's economy, for
which L&T is seen as a bellwether.
India's economy slowed to 4.5 percent in the December
quarter, far off the near double-digit growth the leaders of the
emerging Asian giant would like, as bureaucracy and a lack of
financially viable projects have hit infrastructure building.
However, L&T, whose interests span shipbuilding to railways,
forecast net sales for the current fiscal year would rise by as
much as 17 percent and new orders would swell by about a fifth,
thanks to expansion in the Middle East and Africa.
"I would be very cautious about India growth," A.M. Naik,
executive chairman, told a news conference in Mumbai. "I
wouldn't want to give a very optimistic view," he said.
The Indian government, which has struggled to implement a
slew of policy reforms to help revive growth, faces a general
election within a year, which could see it ramp up social
spending, especially on higher food subsidies.
"Until the new government is installed, there will be social
spending and development will take second priority," said Naik.
But L&T has put a "tremendous amount" of effort into
diversifying and not being an "only-India organisation", he
"Since L&T has a wide range portfolio and since we have
overseas presence, whatever shortfall we have in India we'll
make up for it outside India."
L&T's net profit fell to 17.88 billion rupees in the March
quarter, from 19.2 billion rupees reported a year earlier.
Analysts had expected the company to report a net profit of
18.56 billion rupees, according to Thomson Reuters I/B/E/S.
Overseas orders for the current fiscal year would exceed 250
billion rupees ($4.52 billion), Naik said, up from nearly 150
billion in the last fiscal year, which ended in March.
L&T has in recent months won construction work at an Abu
Dhabi airport and a contract for a gas processing plant for
state-run Saudi Aramco, according to media reports,
although it has declined to comment.
The company, valued at about $18 billion, wrote off about
170 billion rupees of orders in the past fiscal year in sectors
including power and steel as projects failed to get off the
ground, Naik said.
He added that another 50-60 billion rupees worth of
"slow-moving" orders were expected to revive, however.
($1 = 55.2850 Indian rupees)
(Reporting by Matthias Williams and Swati Pandey; Additional
Reporting by Devidutta Tripathy; Editing by Helen