Larsen & Toubro (L&T) has emerged debt-free after considering cash and cash equivalents in FY22, a move that would help the engineering and construction conglomerate rekindle its earlier stalled buyback process.
“There was a net increase of Rs 2,164 crore in the cash balances as of March 31, 2022, as compared to the beginning of the year. The company has become debt-free after considering cash and cash equivalent during the year,” according to the company’s annual report for FY22.
This paves way for L&T to buy back shares, which were put on hold after the Securities and Exchange Board of India (Sebi) had denied permission for its Rs 9,000 crore buyback offer in 2019. The market regulator had rejected the company’s proposal on the ground’s that the group’s consolidated debt to equity ratio would cross two times the paid-up capital and reserves, assuming full acceptance of the scheme.
L&T’s total borrowings fell to Rs 20,298 crore as of March 31, 2022, from Rs 24,474 crore in the previous year. For the year, its gross debt-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 constituted 38% of its standalone revenues in FY22, including forays into new businesses of manufacturing storage batteries. The company’s board has approved entry into the Green Energy business through green hydrogen and derivatives and advanced chemistry cell batteries (such as lithium-ion batteries). These new businesses are proposed to be set up in FY23 through joint ventures with L&T having a dominant share.
The infrastructure major would venture into the business through technology tie-ups and business partnerships. Further, the company has also identified green hydrogen, clean energy technology and offshore wind as new growth avenues.
“We do believe that alternative fuels such as green hydrogen will go a long way to create a cleaner environment and contribute towards the nation’s energy security. We have a unique opportunity to play a significant role to accelerate the ecosystem around green hydrogen, with our thrust in both the EPC (Engineering, Procurement and Construction) and BOO (build own and operate) spaces…,” L&T chief executive officer and managing director SN Subrahmanyan said.
In FY22, L&T’s revenue from its green portfolio of businesses stood at Rs 38,843 crore. For the reporting year, it contributed 38.2% of total revenues, an increase from 33.2% in FY21 and 31.4% in FY20.
The company’s green portfolio comprises projects embedded with advanced technology, solutions centred around renewables, water and effluent treatment plants, efficient power distribution, mass transit systems and green buildings.
L&T’s order book stood at Rs 3.58 trillion as of March 31, 2022, with that from the infrastructure segment standing at 73%. L&T is targeting group revenues of Rs 2.7 trillion and an 18% ROE by FY26.
Earlier in May, L&T said it plans to double its revenue and order inflows by FY26, under ‘Lakshya 2026’, a five-year plan with FY21 as the base year.
“India is expected to post top quartile growth among emerging nations in the medium term. Challenges hovering on the horizon include runaway oil prices, supply chain disruptions and the US rate hikes affecting capital flows into India. Despite these roadblocks, however, our view is that the bold structural reforms carried out by the Government in the last couple of years will pave the way for improved 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 out a paycheck of Rs 61.27 crore to Subrahmanyan in FY22, which was about a 115% hike over the previous financial year, the annual report said.