By Hritam Mukherjee and Sethuraman N R
BENGALURU (Reuters) -India’s Larsen and Toubro (L&T) on Tuesday flagged the risk of logistics costs rising due to disruptions in the Red Sea, even as the infrastructure company watches developments in Middle East, which is becoming a key market.
More than half the orders the Mumbai-based company received in the December quarter came from the Middle East – one of its primary markets apart from India.
“The order momentum is continuing despite the friction in the region,” Finance Chief R Shankar Raman said in a post-earnings call.
“But given that the issue in Red Sea is a lingering problem, the company has started to work on alternative routes. There could be some cost implications,” Raman said.
Attacks by Iranian-backed Houthi rebels in the crucial Red Sea shipping lane have in recent months have disrupted shipping in the Suez Canal, the shortest sea route between Asia and Europe.
L&T on Tuesday reported that its consolidated net profit for the quarter ended Dec. 31 rose 15% year-on-year to 29.47 billion rupees ($355 million). This fell short of analysts’ estimates of 33.04 billion rupees, as per LSEG data.
Given the variety and scale of orders it receives, L&T’s results are often seen as a bellwether for capital expenditure in the Indian economy.
The company’s total expenses jumped more than 19%, eclipsing an 18.8% rise in revenue from operations – its slowest topline growth in the last two quarters.
L&T does not expect orders to be robust over the next two quarters due to the general elections in India, which are due by May, though it has a strong domestic order backlog and expects the momentum in international orders to continue.
At the group level, L&T received orders worth 759.90 billion rupees during the December quarter, a 25% increase year-on-year. International orders made up more than two-thirds of the total order inflow.
($1 = 83.0890 Indian rupees)
(Reporting by Hritam Mukherjee and Sethuraman N R in Bengaluru; Editing by Varun H K, Sohini Goswami and Mrigank Dhaniwala)
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