Infra margin held YoY despite 50% revenue decline — sticky cost levers? Risk from labour at higher cost?
Not all pass-through but many contracts have labour inflation pass-through (e.g., dearness allowance formula). Steel benefit (5-6% lower); cement up. Q1 saw Rs.200 crore reduction in normal sales/admin (Rs.100 crore on travel) net of Rs.100 crore Mindtree addition. Won't speculate on margin sustainability.
Lost 40 days lockdown but core E&C revenues only down 46% — catch-up done? Normalcy earlier than expected?
Not pessimistic — 190,000 labour decent for execution. Each site has local conditions; some opened with 30% workforce restriction, some 50%. 2-3 quarters before complete normalization. Don't apply thumb rule. Won't catch up on lost revenue this year — execution postponed not lost.
Segments doing better? Is hydrocarbon 100% normal vs domestic?
Hydrocarbon margins affected by job mix (fewer jobs crossed margin recognition vs prior year, foreseeable losses, lockdown losses, under-recovery). International less affected than domestic but partial closures still occur. Heavy Engineering exports. Won't speculate further.
Order prospects 6.3tn vs 8.5tn last year — 20-25% decline in prospects? Why no guidance?
Not back-of-envelope arithmetic — prospect inclusion is judgmental. Many remote prospects excluded under uncertain conditions. Government clients deferring. Sectors with Govt/PSU exposure look more concrete than private sector ones.
Bigger cost benefit from SG&A savings vs commodity?
Wouldn't get into that level of granularity. With 50% revenue fall, material consumption also falls 50% so commodity savings restricted to that extent.
How are customer COVID lockdown cost negotiations progressing? How much of Rs.500 crore/month fixed overhead booked vs WIP?
No significant number of customers have agreed in writing yet. Until formal commitment or money received we don't account for it. Rs.500 crore/month subcontracted labour during lockdown — partly went into Q4 last year and part charged off this quarter (part of COVID impact). Infra alone charged ~Rs.150 crore overheads.
China-India geopolitical issues — how does it affect L&T's China JVs and supply chain?
Existing contracts honored — sanctity of contract. Going forward will broaden supply chain ecosystem and look at alternatives. Many companies looking to India seriously now. Won't speculate on opportunities yet.
Infra margin sustainability with lower commodity prices vs labour escalation?
Won't speculate on margin sustainability or renegotiation risk — Q1 was unprecedented black swan event.
Did portion of other income contribute to segmental margins? Any indicative number on Hyderabad Metro / FS support from E&A proceeds?
Some other income in segments but not materially attributable to flat infra margin. Hyderabad Metro: VGF pending may retire some debt; await E&A proceeds for specifics. Realty drove ~half the drop in Other segment but ~60 flats handed over in Bangalore.
How much of the Rs.500 crore/month was actually incurred and accounted? What is fixed overhead in Infra?
Rs.500 crore was lockdown-period estimate; not feasible to collect granular detail from 700-800 sites. Infra overhead charge to P&L ~Rs.150 crore. Won't disaggregate further.
Was 8tn prospects from government down to 4tn? Large iconic project pipeline?
8tn was central+state combined annual spend pre-pandemic; tax shortfalls offset by additional borrowing program. Won't give large iconic project pipeline details.
Sub-contracting charges as % of revenue declined sharply — explanation? Construction material decline driven by steel?
Cannot apply normal marginal costing principles in these times. Sub-contracting includes some material; not directly proportional. Construction material consumption depends on project stage, not steel prices.
Order book exposure to China supply chain — quantify?
Wouldn't be able to give that detail. Philosophy is to find alternative sources domestically or other geographies.
Hyderabad Metro TOD timeline and Defence orders this year?
Won't speculate on TOD timeline — commercial real estate needs to recover in Hyderabad. Defence: Q1 expected orders pushed forward; hopefully Q2.
Quantification of state share of 6.3tn prospects?
Won't be able to give details. Could be different from order book composition — water has many state projects.
Daily revenue run-rate vs same period a year ago — any range?
Wouldn't be able to give that color, sorry to disappoint.
Labour at 190K despite social distancing seems high — why this confidence and execution range?
Won't compare to peers — L&T more diversified. Won't give execution range; question too speculative. Don't apply mathematical interpolation.
Can L&T price working capital pressure into bid margins? Will L&T gain market share given competition stress?
Working capital under control. Customers more demanding. PBIT-margin focus at bid stage; interest is treasury function, tax pan-company. Hope of market share gains but speculative — outlier bids spoil equation.
Labour situation improving — when does it reach optimal level and how does execution pick up in Q2/Q3?
Q4 peak labour was ~225,000; current 190,000 (~70% of peak). Monsoon season anyway reduces labour requirement. Coming back to normal operating requirement could be a couple of quarters away.
Sharp spike in other borrowings (ex-FS, ex-development projects) — provisional borrowing for working capital pressure?
Two reasons: (1) tank up on liquidity in April given world turmoil and lockdown; (2) Rs.4,000-5,000 crore earmarked for repayment of earlier borrowings due during the year — raised in advance.
When do Schneider E&A proceeds come in?
Both committed to deal. Pending physical signing of land transfer documents which require international travel. Once travel opens up via 'air bubbles' or dedicated flights, deal will close.
Order inflow color domestic and international and any deferral on international given low oil prices?
Pickup in ordering activity with senior PSU/state officials avoiding electronic-only. Pipeline Rs.6.3tn — Infra 5tn, Power+MMH 50,000 crore, Hydrocarbon 70,000 crore, HE+Defence ~10,000 crore. Oil at $40 not good for OPCs; >$50 alleviates fiscal equation. Reports forecast $50-65/barrel. Timelines uncertain.
Did you book Nabha Power revenues at 100% availability? Hyderabad Metro amortization in Q1 and FY21 cash needs?
Nabha PLF fell with Punjab demand drop but PAF was ~87% (above threshold for capacity charges), so revenues fell ~50% but capacity charges intact. Hyderabad Metro: under lockdown all quarter, no collections, negative EBITDA, depreciation ~Rs.70 crore/qtr. Won't speculate on FY21 cash needs; Nabha shouldn't need anything; HM may need.
Labour at 190K and 95% sites operational — is containment zone the meaningful bottleneck for revenue growth in normal December quarter?
95%+ sites operational; containment zones limited to handful. Until virus eradicated or vaccinated, social distancing norms persist — execution won't go big bang back to boom levels. Some constraints will continue.
How significant is benefit of lower commodity cost? How did infra margin hold despite revenue drop?
Infra consumes lots of variable cost (material + sub-contracted labour); these scale with revenue so margin held. Benefit was on overhead reduction. Yes commodity benefit but not humongous.
Lower crude prices impact execution/cash collection in Middle East?
Middle East respects sanctity of contract. Some countries may request execution timeline elongation but execution not directly affected. Ordering uncertain. Cash collection challenges always there but liquidity management is core focus.
Labour 190K possibly higher YoY? And prospect pipeline split — domestic vs overseas, MEA vs Africa?
Wouldn't be able to give clear answer on YoY labour comp. Of 6.3tn pipeline, ~1.2tn international. Hydrocarbon equally domestic/intl. Water and Power T&D have decent intl exposure with diversification. T&D ~half Africa+ASEAN, half Middle East.
Increase in development project debt of Rs.16bn — Hyderabad Metro pending payments?
Half from Nabha (liquidity tank-up), half from Hyderabad Metro — Rs.700 crore-odd to repay creditors. Hyderabad Metro total debt ~Rs.15,000 crore; more or less done depending on TOD plans.
What is the COVID revenue impact this quarter?
Approximately Rs.12,000 crore impact on Q1FY21 revenues.
Hyderabad Metro fixed cost burn? Debt repayment? Variable vs fixed price contracts?
Hyderabad Metro fixed cost ~Rs.70 crore/qtr ex interest (Rs.50 crore cash); moratorium availed. ~55% of order book is variable (pass-through) on materials. Heavy Engineering largely material-variable too.
Still incurring Rs.500 crore subcontracted labour overhead per month? Any slow moving orders / states with payment delays?
Rs.500 crore/month was during lockdown only — not continuing. State government delays not new — MP, Rajasthan lagging but picking up. AP situation well known. Slow-moving orders ~Rs.5,000-7,000 crore.
Containment zone impact on order book by geography? State government share of order book? EBITDA breakup of Nabha vs HM?
International sites all operational; few domestic sites in urban containment zones (mostly B&F). State government share of domestic order book = 37%; total = 28%. Nabha EBITDA positive; Hyderabad Metro negative due to fixed opex.
Did any projects cross margin recognition this quarter contributing to infra margin? Which sectors saw faster ramp-up?
No — no large project crossed margin recognition. With 700-800 projects, individual project effects don't swing the needle. Sites in remote/rural areas bounced back faster than urban/semi-urban. Design work transitioned to work-from-home.
Can machinery substitute labour shortage for execution?
Man cannot be easily substituted in short period. Workforce reduced from 300,000 to 225,000 over years through digitization, but cannot be done quickly.
Multilateral funded projects — payment constraints from COVID, certification delays?
Multilateral payments tied to milestones — execution-driven. Yes certification delays from independent engineer site visits could delay payments.
Bidding strategy — recently lost Rs.7-8K crore orders bidding well above plant cost / L1?
Bidding strategy unchanged — economic cost build-up at minimum threshold margins. Competition outlier bids not commentable. 150 crore PM CARES Fund expensed in Q4 itself.
Domestic 5tn pipeline split by segment? Tendering delays in Power?
Water, Heavy Civil, Power T&D each ~Rs.1 lakh crore; rest split between B&F and Transportation Infra. Tendering delays widespread, especially Power. Building & factories pipeline external.
Risk of further order cancellations beyond Q4? State government share clarification (37% vs 27%)?
No further cancellations seen. Clarified: 37% is state share of domestic order book (Rs.2.30 lakh crore); 28% is state share of total order book (Rs.3.05 lakh crore).