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L&T net down 25% in Q4

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Mr A.M. Naik, Managing Director & CEO, L&T, at a press conference in Mumbai on Friday.

MUMBAI, June 14

LARSEN & Toubro Ltd (L&T) today reported a 10.07 per cent rise in net profit to Rs 346.8 crore for the year ended March 31, 2002, as against Rs 315.06 crore in the corresponding period last year.

Its board has recommended a dividend of Rs 7 per equity share amounting to Rs 174.34 crore (Rs 6.50 per share amounting to Rs 161.85 crore).

Net sales/income from operations in 2001-2002 was Rs 8,358.85 crore (Rs 7,825.43 crore). Other income for the year touched Rs 219.66 crore (Rs 206.82 crore), including Rs 40.07 crore got from extinguishment of debt.

The company's orders had risen by 4.7 per cent to Rs 10,922 crore. It has submitted a bid for the Palakkad-based Instrumentation Ltd and has also begun due diligence of disinvestment candidate, Engineers India Ltd (EIL).

During the fourth quarter of 2001-2002, L&T's net profit dipped by 25.41 per cent to Rs 186.76 crore (Rs 250.4 crore) though its net sales/income from operations increased to Rs 2,829.03 crore (Rs 2,479.68 crore). The fall in cement prices during the period by Rs 20 per bag impacted to the extent of Rs 90 crore, Mr A.M. Naik, CEO & Managing Director, L&T, said at a press briefing.

According to Mr J.P. Nayak, Director overseeing the cement business, the first quarter of 2002-2003 prices are not much better than that in the just preceding quarter. "We expect prices to firm up by Q3'', he said.

Given Grasim's equity acquisition in L&T, the proposed demerger of its cement division is on hold. "The demerger is deferred for now, but cannot say it is deferred for the long term'', Mr Naik said.

Besides distribution and transportation synergies already cited by L&T and Grasim (estimated saving of Rs 30 crore for L&T), Mr Nayak said a team was studying the potential of cross-manufacturing which would entail sharing production facilities.

Asked if this cross-manufacturing could be leveraged on the strength of Grasim's current 12.89 per cent equity stake in L&T or a closer association was required, Mr Nayak merely said, "Those are being looked into''.

He was equally restrained while commenting on Grasim's reported stand that the synergies were slow in taking off. "All good things take time'', he said.

Earlier, Mr Naik said, he did not see any threat to L&T's professional management from Grasim's equity acquisition. Most family business houses themselves use professional managers.

Debt to be pruned

In 2002-2003, L&T planned to reduce its debt further by Rs 450-500 crore, Mr Y.M. Deosthalee, Chief Financial Officer, said. According to him, Rs 120 crore of debt was prepaid in May.

In 2001-2002, L&T had cut total long-term debt by almost Rs 700 crore to Rs 2,761 crore, its average cost touching nine per cent. Prepaid debt amounted to Rs 339 crore. L&T's operating profit after interest had consequently risen to Rs 736.88 crore (Rs 628.19 crore). The forex component of total debt is roughly Rs 700 crore.

The company seeks to bring its shareholding down to 26 per cent at the special purpose vehicles (SPVs) floated for project execution. Of the three SPVs, divestment of around 20 per cent has already occurred at two. Mr Deosthalee said the proposed dilution of equity to 51 per cent at L&T Holdings, set up to invest in SPVs, would take time as the critical mass of business was not yet there. In the interim, the holding company would be adequately capitalised using debt, the proposed equity divestment to infrastructure financiers projected to happen over the next six to eight months.

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