Company Data
Market cap (Rs mn) 1,129,954
Outstanding equity shares (mn) 602
Dividend yield (%) 0.7
52-week high/low (Rs) 1,898/1,370
Hyderabad Metro win to boost growth - Buy
Engineering and construction company Larsen & Toubro (L&T),
has won the Rs 12,132-crore Hyderabad Metro Rail Project. The
financial closure for the project, which is expected to be
completed in about four years, will be achieved in six months.
This project will be executed on a design, build, finance, operate
and transfer (DBFOT) basis.
As per reports L&T had asked for Rs 1,458-crore viability gap
funding (VGF). The central and state governments together are
willing to provide Rs 4,853 crore VGF (40% of the total cost).
Other than the ticket fare, the project will provide the company
real estate construction rights over 18.5 million sq ft.
Medium term boost: In the medium term, the engineering giant is
expected to get a major boost from the metro project win. The
company is set to garner some other gains other than the
immediate addition to the order backlog. The Rs 12,132-crore
project adds almost 10% to L&T's existing order book of Rs 1 lakh
crore. This business is expected to be a major driver for the
company in the coming years.
Hyderabad metro – largest rail project in India: The Hyderabad
metro is the biggest metro project in India with a total cost of Rs
120bn, proposed route network of 72km and 66 stations. Media
reports suggest that ~40% of land acquisition is remaining (which
can have an impact on progress of the project).
L&T's focus on rail business pays off: L&T has beefed up its
expertise in the railways segment over the past few years. This
includes attracting talent from the Indian railways, taking up the
Rs 13.6bn Mumbai monorail project (with Scomi Engineering) and
a Rs 3bn contract from Chennai Metro, as well as acquiring ~15%
stake in Kalindi Rail Nirman (engaged in signalling, track laying
work). We expect L&T to continue to gain from emerging
opportunities in railways. Additionally, with Bengaluru,
Ahmedabad and Kochi also evaluating metro projects, the metro
rail business holds significant opportunity for the company. As per
reports the total value of these projects adds up to Rs 38,000
crore.
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