L&T becomes debt free on cash and cash equivalents in FY22

Larsen & Toubro (L&T) emerged debt-free after considering cash and cash equivalents in FY22, a move that would help the engineering and construction conglomerate restart its previously stalled buyout process.

“There was a net increase of Rs 2,164 crore in cash balances as of March 31, 2022, compared to the start of the year. The company became debt free after taking into account cash and cash equivalents during the year,” according to the company’s annual report for fiscal year 22.

This paves the way for L&T to buy back shares, which were suspended after the Securities and Exchange Board of India (Sebi) refused clearance for its Rs 9,000 crore takeover bid in 2019. The market regulator had rejected the company’s proposal on the ground. that the group’s consolidated debt-to-equity ratio would be greater than twice the paid-up capital and reserves, assuming full acceptance of the regime.

L&T’s total borrowings fell to Rs 20,298 crore as of March 31, 2022, from Rs 24,474 crore the previous year. For the year, its gross debt-to-equity ratio fell to 0.30:1 from 0.40:1 a year ago, it said in the annual report.

L&T also intends to advance its green business portfolio, which made up 38% of its own-source revenue in FY22, including forays into new storage battery manufacturing businesses. The company’s board of directors has approved entry into the green energy sector via green hydrogen and its derivatives and cell batteries with advanced chemistry (such as lithium-ion batteries). It is proposed to create these new businesses in FY23 through joint ventures with L&T holding a dominant share.

The big infrastructure would venture into the business through technology tie-ups and business partnerships. Additionally, the company has also identified green hydrogen, clean energy technologies and offshore wind as new avenues for growth.

“We believe that alternative fuels such as green hydrogen will go a long way in creating a cleaner environment and contribute to the country’s energy security. We have a unique opportunity to play an important role in accelerating the ecosystem around green hydrogen, with our push into both the EPC (Engineering, Procurement and Build) and BOO (Build, Own and Operate) spaces…” , CEO of L&T and Managing Director said director SN Subrahmanyan.

In FY22, L&T’s revenue from its green business portfolio amounted to Rs 38,843 crore. For the year under review, it contributed 38.2% of total revenue, an increase from 33.2% in FY21 and 31.4% in FY20.

The company’s green portfolio includes projects integrating advanced technologies, renewable energy solutions, water and effluent treatment plants, efficient energy distribution, mass transit systems and green buildings.

L&T’s backlog stood at 3.58 trillion rupees as of March 31, 2022, with that of the infrastructure segment standing at 73%. L&T is targeting group revenue of Rs 2.7 trillion and an ROE of 18% by FY26.

Earlier in May, L&T announced plans to double revenue and order intake by FY26, under “Lakshya 2026,” a five-year plan with FY21 as the baseline.

“India is expected to post first-quartile growth among emerging countries over the medium term. Looming challenges include runaway oil prices, supply chain disruptions and US rate hikes affecting capital flows to India. Despite these obstacles, however, we believe that the bold structural reforms carried out by the government over the past two years will pave the way for an improvement in the quality of growth,” said AM Naik, Chairman of L&T.

The company also plans to divest non-core assets, he added. The conglomerate also handed over a paycheck of Rs 61.27 crore to Subrahmanyan in FY22, which was up about 115% from the previous fiscal year, according to the annual report.

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