http://www.livemint.com/Industry/fqCsekFJD3510P69cf2frL/LTsinfrastructure-investments-halve-shareholder-returns.html
L&T is the largest road concessionaire in the country, with 17 road projects involving a total estimated project cost of Rs.18,200 crore. The projects, of which 13 are operational, reported a traffic growth of 7% in the quarter ended 30 September but continue to post a loss.
L&T is also developing the Hyderabad Metro project, the first phase of which is likely to be completed only in 2018, past its original completion date of June 2017. This has led to cost overruns and pushed back the timeline over which the project is expected to turn profitable.
From L&T IDPL alone, the RoE has fallen to under 10% as on date from 18% about five years ago, said Maybank Kim Eng Securities India analyst Anubhav Gupta.
“L&T’s RoE suffers due to poor returns from investments in infrastructure projects such as roads, mass transit railways, ports, etc. With a decline in construction earnings, RoE should decline to 8.8% from 12.1% over FY15-17,” Gupta wrote in a 2 November report, while lowering L&T shares to a “sell” rating.
According to a 21 October report by Motilal Oswal Securities Ltd, L&T’s investments in subsidiaries (including loans and advances) have risen to Rs.20,400 crore from Rs.1,300 crore between fiscals 2008 and 2015. Over this period, L&T’s standalone RoE declined to 13% from 28%.
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