While sales on the domestic front have maintained momentum, exports — especially that of industrial valves — have taken a beating this fiscal. As a result, the overall export revenues are down by about 29% for the year. Moreover, impact of rising operational costs is evident, as operational margins have dipped by 20 basis points for the year.
Rising commodity prices, especially those of steel, copper and silver (used in switchgear) have dented the company's margins. The other cost to have hit the margins is the rising interest costs. With no clear signs of commodity prices cooling off in the near term and anticipations ripe with respect to another rate hike by the RBI, the pressure on margins is expected to continue even in FY12.
Another point that bothers the company is its inability to meet its order intake guidance for FY11. Deferment of orders, especially from public sector entities, has hurt its order inflows in FY11. Having projected a 25% order growth at the beginning of the year, the company had later revised it to about 18–20%, but finally, managed to achieve 15% YoY order growth — its lowest since FY07 — to . 79,800 crore.
Having said that, the company has accumulated a robust order book of over . 1,30,000 crore, which is nearly three times its standalone revenues for the year. This gives it a clear revenue assurance in the near term. Given this order backlog, L&T expects a 25% growth in revenues for FY12. As far as the order inflow growth is concerned, it has maintained a conservative stand in issuing the guidance at around 15-20%. Given the clarity on the political front, post the outcome of state elections, one can expect the earlier deferred orders from the public sector to be awarded in near future — especially from the Railways. Provided the company is able to maintain its tempo of execution, it appears well placed to meet its guidance for the current fiscal.
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