Larsen & Toubro Ltd., India’s biggest engineering company, plunged the most in more than three years in Mumbai after reporting fourth-quarter profit that missed analysts’ estimates.
Larsen slumped 5.7 percent, the sharpest loss since Jan. 21, 2010, to 1,513.90 rupees at the close, the worst performer on the benchmark S&P BSE Sensex today. Mumbai-based Larsen has dropped 5.8 percent this year, compared with a 3.3 percent gain for the Sensex.
The company’s net income fell 6.7 percent to 17.9 billion rupees ($322 million) in the three months ended in March, lagging behind the 18.8 billion-rupee median of 35 analysts’ estimates compiled by Bloomberg. Chief Executive Officer Krishnamurthi Venkataramanan is aiming to boost Larsen’s overseas business as slower economic growth at home cools demand for construction projects.
“Slow-moving orders are a concern not only for the company; they paint a true picture of the economy,” said Jinal Joshi, a Mumbai-based analyst at BOB Capital Markets Ltd. Larsen’s “numbers are a commentary on the bearish economy.”
India’s capital-goods production, a gauge of corporate expenditure on factories and machinery, has shrunk in 16 out of the 21 months through March, according to the latest available data. The economy grew 5 percent in the year ended in March, the weakest pace in a decade, according to preliminary estimates by the nation’s statistics agency.
“The challenges in the growth path of Indian economy are still persisting,” Larsen said in a statement. “Constraints to the speedy implementation of the reform process is adversely impacting the investment climate.”
Sales rose to 203 billion rupees in the quarter from 185 billion rupees. That lagged behind the 211.3 billion-rupee median estimate. The company missed sales estimate for the second quarter, according to data compiled by Bloomberg.
An increase in finance and inventory costs also weighed on the company’s profitability. Finance costs more than doubled to 2.81 billion rupees and inventory charges surged seven-fold to 8.2 billion rupees, according to the earnings report.
The company won 880 billion rupees of orders last year, taking the total value of orders to 1.54 trillion rupees, according to the statement. New orders may rise 20 percent in the year that began April 1, Larsen forecast.
“That target is ambitious but achievable,” said BOB Capital’s Joshi, who has a buy rating on the stock. “Larsen has the ability to surprise because of its diversified nature.”
Overseas orders accounted for 13 percent of Larsen’s total contracts, the company said in the statement. Larsen plans to expand contribution of sales from abroad to 30 percent of its total, Chief Financial Officer R. Shankar Raman said in an interview last month.
Larsen’s board approved giving one free share for every two held.