Ladies and gentlemen, good day, welcome to Larsen & Toubro Limited Q2 FY 2020 earnings conference call. As a reminder, all participant lines will be in the listen only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal for an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Arnob Mondal. Thank you, over to you, sir.
Thank you, Ray. Good evening, ladies and gentlemen. Thank you for all logging in at a slightly late hour, better late than never. As far as the format is concerned, we'll first run you through a presentation, after which the session will be open for Q&A. We uploaded the presentation on our website at five o'clock, hopefully you have downloaded it and had the opportunity to have a look at it. Before we get into the details, just a few opening remarks. This quarter and this half year to a large extent was a very unusual year in the sense that we've been facing a very uncertain and volatile economic scenario, we'll talk about that towards the end when we talk about the environment after the detailed slides. Two things have happened in this quarter particularly, which merits mention.
Firstly, we acquired control of Mindtree in the beginning of this quarter, and hence, because it became a subsidiary, it has been consolidated on line-by-line basis. The current quarter results, and obviously the half year results also incorporate Mindtree numbers, and some data points may not be strictly comparable with the previous year on a year-on-year basis or even on a sequential basis. The other thing that happened was there was a reduction in tax rates for domestic companies. A fair bit of complications have arisen from that, including whether companies can opt for it and forego all exemptions. As you know, we are a very large group and we consolidate a number of legal entities. We have had to take decisions on whether to opt for that on a company-by-company basis. More on that later when we come to the detailed P&L commentary.
These two are the major developments that have happened during the year. I'd like to move to the next slide, which is a disclaimer slide, obviously this is a very important slide. I will take it as read. We put this slide primarily because very often we make forward-looking statements which may or may not materialize in the course of time. We obviously would not like to be held responsible for utmost accuracy of those forward-looking statements. I now like to move to the group performance highlights, that is on slide four. I think firstly, we've seen some very strong all-around growth in very testing times, starting from growth of order inflows at 20%, more on that later, to a very decent revenue growth of 15%, to an increase in the order book. Of course, we've seen a recurring PAT growth of 24%.
This is a very strong showing actually. Just for clarification, when we display recurring PAT, it's actually on a like-to-like basis. What we do is that we take the normal reported profit after tax, and we subtract or add back whatever exceptional items of income or expense are. So to bring it on a like-to-like basis. So on a like-to-like basis, recurring PAT, as we call it, has grown by 24%. Going to the next slide number 5, which deals with key financial indicators. First upfront, I think we've had a very stellar show as far as order inflows are concerned. In the current quarter, we crossed INR 48,000 crore and order inflows have grown by 20% and overall 16% for the last six months. As I mentioned, this is in the face of a very uncertain and challenging economic environment.
The order book, as you can see, has also crossed the INR 3 lakh crore milestone after a very long time. We have not had it before, but it took quite some time for it to cross. On a year-on-year basis, it has grown by 9%. Revenue growth, again, I think all of us are aware of the uncertain and difficult times that we are living in, particularly as far as credit flows are concerned. In that environment, revenues have grown by 15% for the quarter and 13% for the half year. Reported PAT has grown by 13%. I mentioned the recurring PAT growth. One thing which you'll notice is that working capital is still a bit elevated at 23%.
It was close to around this level at the end of Q1. Obviously this is due to stretched payment cycles in a tough credit flow environment, as well as our continuing efforts to ensure that we give proper adequate support to our vendors. Return on equity on trailing 12-month basis continuously improves. We hope to reach our target of 18% in FY 2021. Going to the next slide, which is slide number seven, which essentially deals with order inflow and order book. We've had very strong growth in orders in Q2 as well as H1. Q2 has grown, as I mentioned, by 20%, and H1 by 16%. This was essentially driven by hydrocarbon power as well as buildings and factories to some extent. As you can see in Q2, international orders grew significantly, whereas in Q1 it was domestic orders which had grown.
The tables have turned to some extent. This growth has been achieved even though the previous year had some large order wins like the Dhaka Metro, Nagpur-Mumbai Expressway, and Coastal Road Projects. We also have a very decent prospect pipeline for the remaining half of the year, which is, the pipeline is encouraging in the volatile environment. As far as the order book is concerned, I mentioned that we have crossed INR 3 lakh crores. Now we have six business verticals, all of which are fairly decently sized. They range between 11% of the order book, going right up to 17% of the order book, in that range. More or less all are fairly big size, whether it be Buildings & Factories or Transportation Infra or Heavy Civil or Power Transmission & Distribution or Water & Effluent Treatment or Hydrocarbon.
All these six now occupy a fairly large size of the order book, and hence the growth is not so much dependent on any single vertical. It is more secular to that extent. Going to the next slide number eight, which gives the performance and sales. As far as revenue is concerned, I mentioned that we have grown 15% in Q2 and 13% for the full year. Here again, I think all of us are well aware that since beginning of Q1, number of projects are not contributing to revenue, which were expected to have contributed. Number of projects in Andhra Pradesh are now not contributing. The Coastal Road is not contributing. Our revenues are significantly short of budget, what we had internally budgeted because of this, even though we have made up in some other areas as well.
Of course, Q2, the revenue growth has largely been driven by Infrastructure, Hydrocarbon, and Information Technology and Technology Services businesses. There's been a fairly large increase in the finance charge operational expenditure. This finance charge operational expenditure is essentially financial services and the finance lease that we have for Nabha Power plant. There's not been any increase in Nabha, but the growth is largely on account of financial services. Like any other business, it's essentially because of larger volume of borrowings to fund their growth. That's why we landed up with a growth of 13% in this in Q2 and 19% for the half year as a whole, even though there's been a small marginal 20, 30 basis points increase in the borrowing costs. Which again, is an outcome of increased utilization to a large extent.
As far as staff cost is concerned, staff costs have also gone up by 39% this quarter and 25% for the full year. This is essentially because of the resource augmentation that we have done in our services business, and as well as Mindtree, as I mentioned, has got consolidated. In fact, Mindtree has added over 20,000 headcount to the staff cost. In fact, out of a total of around INR 1,700 crore increase in staff cost in Q2, Mindtree alone accounts for around INR 1,200 crore or so, slightly more than INR 1,200 crore. That itself accounts for major bulk of increase in staff costs. As far as sales and admin is concerned, there again, Mindtree has got consolidated as well. The increase that you see in sales and admin is largely because of, number one, Mindtree consolidation, and secondly, increased NPA provisions in financial services business.
If we strip out these two increases, then the net increase comes to around 10%, which is fairly in line with the revenue increase. Going to the next slide, which is slide number nine. I think EBITDA has grown reasonably well, and to a large extent, this EBITDA has been driven also by good EBITDA in the core business as well. The finance cost has gone up significantly, 72% in Q2 and 67%. This is essentially on account of increased borrowings that we have had to do to fund our growth. Even though the borrowing costs at around 7.5% per annum are still one of the lowest amongst all corporates. This is a natural outcome of growth, nothing else.
As far as depreciation is concerned, the higher depreciation charges that you see again, are partly on account of Mindtree consolidation, as well as partly on account of right-of-use assets, which have come into the balance sheet after implementation of Ind AS 116. That is essentially the reason why depreciation has gone up. Tax expense, I'll come to it the next slide. As far as joint ventures and associated company PAT is concerned, it reflects IDPL roads, forgings, and power JVs performance, in addition to some other smaller JVs and associate companies. And to some extent, this has seen a growth particularly in Q4 because we've accounted for a claim in IDPL that we have done in Q2. Discontinued businesses. Discontinued operations represents Electrical Automation since we are well on the way to divesting those, and we have a decent line of sight into conclusion of the transaction.
It has now been classified as discontinued operations. Reduction in non-controlling interest profits essentially reflects lower profits in services business. I think all of us are aware that services business as a whole, whether it be financial services or information technology or engineering services, the growth rates have come down to some extent. The extent of profits has also come down. In case of financial services, I'll come to that later on. To a large extent, the lower profits is because of restatement of deferred tax assets that they did in Q2. Going to the next slide, which is a brief word on the income tax expense.
Much has been talked about this, and what we have done is that the parent company and some of the subsidiaries have computed the tax expense of the current financial year in line with the new tax regime announced under Section 115BAA. Here again, we've gone company by company. Accordingly, number one, the provision for current and deferred tax has been determined at the rate of 25% in Q2, and obviously for H1 as well, for the whole of H1. The deferred tax assets and deferred tax liabilities as of 1st of April have been restated and recomputed at the rate of 25%, and that has obviously led to a fair amount of one-time expenses.
The other thing that has happened is that since those companies which offer low tax rate are not allowed, there's no MAT applicable, and the clarification has come from the department saying that the unutilized MAT credit will lapse. Hence, those companies, including the parent who have opted for the new tax regime, have written off the unused MAT credit that was being carried forward in the balance sheet. Barring information technology and technology services, most group companies plan to migrate to the new tax regime. We'll move to the next slide. The next few slides deal with the key subsidiaries and segments. Slide number 12 is for reference, which is a segment composition. I think all of you are aware of this.
There's no change here except for the fact that Information and Technology Services, which considers information technology and technology services, now has a new entity included in the information technology part, which is Mindtree. There's no change in the segment definition as such. Moving to the next slide, which deals with order inflow composition. This again is essentially for reference purposes. I won't get into every single line item here. You can study it at your leisure. As far as order inflow is concerned, and here I'd again like to reiterate that we also include services as part of the order inflow because the revenues arise from short cycle orders. Going to the next slide number 14. This again is essentially for reference, and this deals with the order book.
The INR 3 lakh crore of order book, as you can see, the infrastructure segment accounts for over 70%. As far as international order book is concerned, it's around INR 67,000 crore out of INR 303,000 crore. One noticeable fact that has happened over the last few years is that our efforts to diversify our geographical concentration away from the Middle East by entering other countries is bearing fruit. Today, 43% of the international order book consists of orders from non-Middle East countries. As far as the order book is concerned, here again, as in previous quarters, for quite a few quarters, in fact, the Public Sector has been the major contributor to this and it still continues to have a major contributor to around Public Sector in the domestic order book accounts for 78% of the total domestic order book today.
Going to the next slide, which is again revenue, slide 15. This again is for reference. I have already given my comments on revenues and revenue growth. I'll not repeat that. We'll go to the next slide 16, which is infrastructure sector. As all of you would know, this segment is the largest segment today that we have within the group. Obviously, the financial fortunes of this particular segment swings the entire group-level financials. Now, as far as infrastructure segment is concerned, public sector still continues to drive order inflows. There's been a decent revenue growth of 9% in the current quarter and 11% for the half year as a whole. This 9% is in spite of the fact that, as I mentioned, Andhra Pradesh jobs and coastal job have not contributed to revenues in spite of that.
In fact, if you look at this domestic growth, domestic part has grown faster than international. In fact, domestic growth in Q2 was 13% and 19% for the first half as a whole. That also indicates that the execution of our domestic order book, barring those few orders which are not moving, are going fairly strong. As far as EBITDA margins are concerned, you'll also see that there's been a 30 basis point improvement in Q2, and now as far as the full half year is concerned, H1 is concerned, the EBITDA margins of this segment are now at par, which is more or less in line with what we had sort of indicated, not guided, sort of indicated in our last quarterly call. Going to the next slide, which is power. I think everybody knows that this particular sector is going through significant stress by way of overcapacity.
Today, in a year, as far as coal-fired power plants are concerned, around 6-8 gigawatt of orders are getting ordered out against the installed capacity of boilers and turbines, supercritical boilers and turbines in excess of 20 gigawatts. Obviously, price competition is fierce in this sector. For the last couple of years, we've hardly won any orders, barring a few one-off orders in things like FGD and all, but no large blockbuster orders. That has led to a significant decline, depletion of the order book, and the opening order book had depleted significantly. Even though the current year has again replenished that, we've got two large orders in the current year itself, so that portends well for future revenues. The depleted opening order book has also been responsible for the revenue decline of 54% that you see.
Obviously, this has also pulled down the overall revenue growth of the company as well. However, we do think that this is a relatively short-term phenomenon, primarily because of the new orders that we have got in the current year, one in Q1 and one in Q2. The prospects are still very decent. There are two EPC coal-fired power plant prospects on the anvil in the remaining part of the year, as well as one Bangladesh power plant prospect that we are pursuing and some smaller FGD prospects that are there in the pipeline. As far as margins are concerned, margins are by and large reflective of different job mix and stage of execution.
Here again, even though most of you would know this, we have some joint ventures, particularly a joint venture for manufacturing supercritical boilers and another joint venture for manufacturing supercritical turbines in collaboration with Mitsubishi Hitachi Power Systems. Because we share joint control under the current accounting standards that we follow, which is in line with IFRS followed by all of Europe, these are not consolidated on a line-by-line basis, and hence their revenues and EBITDA don't appear in this segment. They're consolidated only as our share of PAT under equity method. Going to the next slide number 18, which deals with heavy engineering.
This particular segment in the last couple of years, that's the last 4 to 6 quarters, has seen fairly strong order inflows, very decent order inflows, and as a result of which they landed up with a very large order book compared to the size of the business. However, as far as Q2 is concerned, we have seen orders impacted by deferments. However, that again would, to some extent, be dependent upon economic cycles of global oil and gas industry. The revenue growth both in Q2 and H1 has grown very strongly, and this is essentially because of the very large opening order book that this business had in the beginning on 1st of April, which they have been executing in line with what they had planned to do, and that has led to a large revenue growth.
Here, this business you'll see has very strong margins in excess of 20%. Of course, to some extent, it's logical because being a heavy manufacturing business, it's also a capital-intensive business. EBITDA margins typically tend to be higher in capital-intensive businesses because they have to recover a fair bit of interest and depreciation as well. In addition to this, one of the defining features of this business is that they have global competence. In fact, a large part of their output is manufactured and exported to developed countries. They pride themselves on being at the cutting edge of technology. Of course, they've got a proven track record, and they've also been doing a lot of cost efficiencies in the last couple of years, which altogether, these are yielding very strong margins. Going to the next slide, which deals with defense.
Here, I think policy is a big damper, whether it be converting the Make policy into Make-II, the second version of Make, which is turning out to be a bit of a non-starter, as well as deferment of the Strategic Partner program or broadening the SP program to include defense PSUs. There are various policy impediments which inhibit private sector participation in this sector in a meaningful manner. In spite of the fact that as a country, we spend around INR 90,000 crore a year on defense equipment procurement, around 70% of that is on imports and 30% is in domestic, but large part of that domestic thing goes to public sector undertakings.
Private sector participation has not evolved in a big manner yet, but even though we get decent orders in this business. The revenue increase that you see in Q2 as well as in H1 are essentially the increases also is largely being contributed by execution of the tracked artillery gun order that we got earlier last year in earlier years. That also continues to drive growth as well as margins. Margins actually reflect the stage of execution, job mix, as well as operational efficiency. The decline in margins in Q2 is essentially because last year we also recognized margins on one large job that we are executing. Moving to the next slide number 20, this is hydrocarbon segment. This segment has been doing significantly well, and today their unexecuted order book now has now crossed INR 50,000 crore at the end of 30th September.
The order inflows have also been very significant, and these have been obtained both from domestic as well as international markets. Whether it be domestic, would be customers like ONGC and HPCL. Internationally, Saudi Aramco is one of the largest customers, but they've got significant order inflows from both domestic and international. The strong revenue growth of 21% in Q2 and 14% in H1 is again essentially on the growth of very efficient execution on the back of a very large opening order book. As far as margins are concerned, there has been a bump up in margins, and this is again contributed by efficient execution, job mix as well as certain claims which they received in the current year.
One thing which I think you need to note as far as this business is concerned, it has been very successful, not only in ramping up order inflows and revenues at a 10, 12% margin, it is still a very high ROC business because of very efficient working capital management. Going to the next slide number 21, which deals with developmental projects. This segment is a bit of a complicated segment because it includes both power development business, essentially Nabha Power, which is a 1,400-megawatt power plant that we operate in Punjab, and Hyderabad Metro, which is partially commissioned and getting progressively commissioned. Of course, last year, we also sold a container port in South India in a place called Kattupalli, which also gave us a significant revenue and margin bump up. The revenue, as you can see, is largely contributed by Nabha Power.
In case of Q2, it's contributed over INR 1,000 crore. In case of half year, it's contributed over INR 2,000 crore. Hyderabad Metro has also started contributing revenues. Hyderabad Metro, we've achieved partial commissioning of 30 kilometers in November 2017, 16 kilometers in September 2018, nine kilometers in March 2019. We are progressively commissioning them. We've commissioned around 55 kilometers. We think we should be able to complete the full commissioning by the end of this year. Hopefully, maybe sometime in Q3, if not Q3, at least Q4. The margin profile of this business is still emerging, primarily because it also depends on the outcome of various claims that we've raised on the state government. We'll have to wait and see what the outcome of those claims are.
Here again, like the power joint ventures, we also have a number of concession or cluster of concessions held under the intermediate holdco, which is IDPL, which constitutes both roads and one transmission line, and that is again consolidated at PAT level under equity method. Going to the next slide, which deals with information technology and technology services. As I mentioned earlier, Mindtree results have now been consolidated in Q2. On this slide, you can see the revenue stack up between LTI, L&T Infotech, technology services, and Mindtree. Mindtree, as you can see, has contributed INR 1,900 crores to the top line, and of course, something to the bottom line as well. One thing I think here, everybody is aware that as far as this sector is concerned, there's been a growth slowdown across the industry.
All three businesses here, whether it be L&T Infotech or technology services or Mindtree, have been growing faster than industry. Their growth has been in excess of 10% in Q2, a bit more in H1. Infotech revenues, the growth has largely been led by manufacturing and energy and utilities. Technology services growth has been led by transportation, plant engineering, and medical devices verticals. Mindtree revenue growth has largely been led by travel and hospitality as well as high tech and media. Margin variation, of course, is an outcome of increased resource cost, which is an industry phenomenon, primarily because of pressures of localization in developed countries, particularly U.S., as well as most companies have also seen a bump up in some visa costs that they've incurred, most IT companies. Going to the next slide, which is other segment. This segment, again, is a residuary segment.
It comprises of construction and mining equipment, rubber processing machinery, as well as industrial valve and Realty business. Realty is a mix of residential as well as commercial. The Q2 revenue growth that you see of 7% has largely been driven by Realty and Valves. Here, there's been a bit of a margin variation, which is again due to business mix variation. We'll now go to the next slide, which is Financial Services. They had their earnings call as a listed company, so all their numbers are available for all to see in the public domain. They had their earnings call yesterday. Be that as it may, this business has grown in a very challenging environment. I think the entire NBFC space was severely affected starting from early September last year, and it's still not out of the woods yet.
Some NBFCs have been in the news for wrong reasons, but be that as it may, in a very challenging environment, they managed to grow decently well. Their focus continues to be on retailization of the loan book ensuring that they get a robust net interest margin as well as fee income. Very prudent asset liability maturity management trying to ensure that their asset quality keeps on improving and of course, increasing the diversity of funding sources is something which they're also focusing on. Apart from ensuring that they remain in what they call high quartile return on equity business. In fact, the loan book now at the end of Q2 is now 53% of the total loan book.
L&T Finance Holdings, most of the companies have opted for a lower tax rate. This has also given rise to a one-time impact arising out of deferred tax assets restatement that they had. That has primarily been responsible for the drop in PAT in Q2 compared to Q2 of FY 2019. Going to the next slide, which is Electrical & Automation. As I mentioned, we have classified this as discontinued operations in our financial statements, here I'd still like to give the revenue and margin numbers for your information. One point to note here is that they have had a relatively flat revenue growth in a very soft demand environment. In fact, the industry has recent negative growth. To that extent, they've been holding their own in a creditable manner and probably gaining a little bit of market share in the process.
Margins here again are very decent margins and margins reflect again operational efficiency as well as better realizations that they've been obtaining. Sorry. The next slide. Before I go into the actual environment and outlook, I'd just like to mention a few points. One is the economy is very volatile, uncertain and challenging. I think there's no doubt about that. Private sector CapEx is still muted, whether in the areas of public-private partnership or industrial CapEx or buildings in urban agglomerations. Real GDP growth has slowed down and if you look at the classical formula of GDP, whether it's consumption plus investments plus government revenue spending plus exports minus imports, all of these have registered a bit of a weakness, particularly the consumption part which has slowed, which has dragged down real GDP.
The only silver lining is that the public sector investments are still relatively strong and the areas where we are seeing decent strength are in water, metro railways, some Roads and road adjacencies, whether they be expressway programs or flyovers or special bridges, as well as decent spends in Power Transmission & Distribution as well as in hydrocarbon. Into the environment that we operate in. The next slide. In the next slide, here I've tried to deal with four major external pulls and pushes starting from the top going down on the right-hand side. Those are in green font and on the left-hand side going down to the bottom, the ones in red font are four major internal strengths that we think provide us with an economic moat to tide over short to medium economic cycles. I'll not go into all of these.
Suffice to say that these appear to be the most important macro level factors. As far as our internal capabilities are concerned, I think everybody knows that a very strong and large order book is a good insurance against volatility. A very strong balance sheet enables us to execute even in a difficult time. A proper business portfolio diversified within the EPC also reduces cyclicality, in addition to which the annuity sort of businesses which are services business lend a fair bit of stability as well. Of course our capability spectrum is almost unmatched as far as execution of large complex infrastructure projects are concerned. The next slide is the end of the presentation. However, I'd also like you to keep in mind that there are five important annexures.
One is the segmental performance. We also try to give a disaggregated balance sheet in another annexure which gives an idea of the very large composition of the debt that we hold as well as some major components of the assets that are on the balance sheet. We've also given a slide on cash flows where you can see that Q2 this year has been Q1 as all of you would know saw significant eating up of operational cash flows through increase in working capital. Q2 to that extent has been much better. There's also a slide giving the broad breakup of our share of PAT that we get from JVs and associates. Finally, the slide which gives an overview of the concessions business portfolio. With that, I'd like to hand over the session back to Zaid to start the Q&A.
Thank you very much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press Star and One on your touchtone telephone. If you wish to remove yourself from the question queue, you may press Star and Two. Participants are requested to use a handset while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask a question, please press Star and One. The first question is from the line of Renu Baid from IIFL. Please go ahead.
Yeah. Good evening, sir.
Hi, Renu.
Hi. Yeah, positively surprised with the operating performance of the core businesses there. The first question comes around the core business itself. Typically, in hydrocarbon, we used to say that with this kind of execution ramp-up and orders coming through, 8%-10% was a more sustainable margin rate. Now that this year itself we have been sustaining good double-digit margins. Do we think the overall operating margin expectation for hydrocarbon should now be early teens?
I would not like to go out on a limb and try to interpolate current margins with what could happen.
With the kind of inflows, the size scale of inflows, and the type of jobs which are coming to the business vertical.
No, I think around 10% margin should be a decent thing, too, because you must also understand that in this quarter, we got some claims as well. If you look at half-yearly margin, it's 10.2%. It's not significantly higher than 10%.
Mm-hmm. Sure. Sir, you also mentioned that despite having a reasonably strong inflow in the first half, core inflows we are saying, the order prospects still looks encouraging. Within the second half inflow, would it be possible for you to highlight the overall prospect list remaining for the second half? Which could be the key mega projects which could be targeted, be it the high-speed rail or other refinery orders, something which could be there. Any key notable orders which one should watch out for in the second half?
We've already mentioned the two which are on the radar, but it looks as if the high-speed rail is getting postponed. Next date apparently would be sometime in January. We'll have to wait and see.
Okay.
Barmer Refinery, we'll have to wait and see when it gets ordered out. Those are two large prospects on the anvil. Overall, as far as the infra segment is concerned, we are seeing around INR 4.5 lakh crores worth of prospects fairly evenly distributed between buildings and factories in Smart World and heavy civil and transportation infra and water, as well as PT&D. All typically between INR 80,000 crores-INR 1 lakh crores, approximately. INR 1 lakh-INR 1.1 lakh crores. It's almost equally spread out. It accounts for around INR 4.5 lakh crores. Power generation, whether it be the two EPC orders that we talked about, coal-fired EPC orders, domestic or the Bangladesh international order that we are trying to bid for, as well as some small FGD orders is another INR 20,000 crores.
Hydrocarbon for the remaining part of the year, the total prospect base is around INR 40,000 crore. Metallurgical and material handling is another INR 10,000 odd crore. Heavy engineering and defense, without taking into account the possibility of any large defense programs getting ordered out this year, is another INR 10,000 crore. That stacks up to approximately INR 5,20,000 crore in our core EPC business.
Sure. Which would be good. When we say high speed, the kind of opportunity for Larsen here would be something like INR 35,000 crore, INR 40,000 crore or the addressable market for us, because one single package is a INR 20,000 crore package a year.
That INR 20,000 crore is a media-reported number. I don't know where they got it from.
I think that number is quoted by the customer themselves as an expected size of the contract. In your assessment, what would be the average opportunity size for you here at the anvil?
See, EPC portion of the high-speed rail could be anywhere close to between INR 50,000 crores to INR 60,000 crores, which we would look at targeting. That will obviously be ordered out over a period of time. It will not get ordered out in one shot. As you said, a very large package's tendering is going on, but at this point of time, it's still in the technical prequalification stage.
Sure. The last question related to the order backlog, as in, would it be possible for you to quantify the value of the stuck projects, be it Andhra Pradesh jobs or the coastal road? As in when they might get sorted out, what could be the cumulative value for all these orders put together which are stuck or non-moving in the backlog at the moment?
Andhra Pradesh and coastal road together would be around INR 16,000 crores.
Okay. All right, sir. That's it from my side. We'll get back in the questions.
Thank you.
To you later. Thank you so much, sir. All the best.
Thank you. Next question is from Ranjit Shivaraman from ICICI Securities. Please go ahead.
Hi, sir. Congrats on a good set of numbers given the environment.
Thank you, Ranjit.
Sir, if you can just highlight the infra growth has been good given the overall. I mean that too, largely domestic. If you can, which segment actually was the major driver under infra?
See, almost all segments have driven a very decent growth. Almost all segments. Buildings and factories is slightly slow, but not unduly slow. All the others have grown reasonably well. Buildings and factories and PT&D, Power Transmission & Distribution, are slightly slow, but as I mentioned, nothing of great concern. They've grown, but not as fast as the other five large businesses there.
Okay. When we look at the balance sheet, the payables have reduced, and this has impacted the overall net working capital. What is the outlook here? Will it normalize going forward, or do we continue to support our suppliers going forward? What's the outlook out here?
See, Ranjit, you're absolutely correct. The increase in net working capital is essentially because receivables have been under control. In fact, on an absolute amount, they've not gone up either. The fact is that vendor payables have gone down primarily, as you said, because we've had to support our vendors. If you really look at it objectively, vendors are our execution partners. Any stress that they undergo, financial stress, ultimately reflects on our execution as well. Obviously we will continue to support it. From a macro point of view, while there's enough liquidity in the system, liquidity is not flowing. Credit growth is not really flowing. That is what is also affecting smaller players, particularly our vendors. You would have seen between March and now, I think, as far as I recollect, the decrease in vendor payables is around INR 7,000 crores or so.
Yeah. Sir, finally, this hydrocarbon, if you can quantify how much was that claim amount?
How much was that?
Claim. You told there were some claims in.
It was around INR 70 crores.
Okay, sir. Thanks. I enjoyed it.
Thank you very much. Next question is from the line of Mohit Kumar from IDFC Securities. Please go ahead.
Yeah. Good evening, sir.
Good evening.
Congratulations on good set of numbers.
Thank you.
with the order inflow. My question pertains to the tax impact. Is it possible to quantify if you had not used this new tax regime, what would have been the taxes for the quarter?
Taxes would have probably gone up. The T&L charge would have gone up by over INR 700 crores.
700 crores. Is that a very high number?
This is before NCI.
Is it possible to give the corresponding tax number, the total tax number?
Sorry?
Is it possible to give the total tax number, which right now I think for the quarter was INR 7.9 billion.
Yeah, correct.
What would have been the corresponding figure if we hadn't availed, you know?
The effective tax rate would have been pretty much similar to last year.
Okay. 27% roughly, right? Yeah. Okay, sir. Thanks. Sir, just on the order inflow, does this order inflow includes the Make-II for the quarter? Does it mean that if we have to compare, we have to exclude the Make-II from the quarter for an apple to apple comparison?
Actually, if you want an apple to apple comparison, there are many things which you need to adjust. Firstly, look at it this way. When you're saying apple to apple comparison, you're probably referring to the guidance that we gave, correct?
Right.
Of course, guidance didn't have Mine 3. At the same time, the guidance never anticipated a slowdown in AP Jobs or coastal road, from which we have lost over INR 2,000 crore of revenues alone. Theoretically speaking, it is not appropriate to exclude one part of it, depending upon the way you look at it, and ignore all the other things. During the course of the year, many unforeseen things happen, which lead to a difference in outcome compared to what we had originally projected.
I wanted to ask, is this E&A deal with Schneider finalized? Have you received the cash, or when do you expect the cash receipt?
No. The transaction has not really been consummated. There are still some conditions precedent which need to be fulfilled before we can get the cash.
What is the timeline, sir? Expected timeline?
We do think that we should be able to close the deal by the end of this year. This fiscal year.
Okay. Thank you, sir.
Thank you.
Wish you all the best.
Thank you very much. Next question is from the line of Sumit Kishore from JP Morgan. Please go ahead.
Good evening, sir.
Good evening, Sumit.
My first question is, the recurring profit that you state as 24% growth, what is the 2Q FY 2020 absolute recurring PAT that you're looking at, and what adjustments have you made to arrive at that?
All we have done is that 2Q, you're talking about the second quarter, correct?
Yes.
Second quarter, there's no adjustment that we've done. What we've done is that Q2 of last year, the post-tax exceptional was INR 190 crore, which was essentially a write-back of provision under a case which got resolved under NCLT.
Okay.
That was exceptional. What we have done is that we've reduced that from the reported PAT of last year.
Okay. Basically, you have still looked at INR 25 billion odd for 2Q FY 2020?
Yeah, I still looked at INR 25 billion odd for 2Q FY 2020. You're correct.
Okay. If I look at your taxes, what would you say is the one time which is going to restatement of DTA or put together with the L&T Finance related write down of DTA?
Hmm. Gross amount would be in excess of INR 500 crores.
No, INR 470 crores was for L&T Finance itself.
Yes, that's the bulk of it. L&T Finance is the bulk of DTA. As far as L&T is concerned, ECL provisions lead to some amount of DTA, but nothing very significantly large compared to L&T Finance. Their NPA provisions lead to a very large DTA. There are also some DTAs in the parent which we reset it. The bulk of the DTA was in L&T Finance. You're correct, it is INR 470 crores or so.
The write-off of unutilized credit for MAT, that should be seen as a one-off.
That's a one-off. That's also a one-off.
That is also INR 400 odd crores, right?
No, it's not INR 400 crores. It was around INR 230 odd crores.
INR 230 crores. Okay.
Okay.
Just the last point, if I look at the other income reported for 1Q FY 2020, there seems to be a restatement in other income in sales, admin, and administration and other expenses. What is this restatement and why has it been done?
See, the restatement was essentially in financial services where they had taken a 50% provision against bonds of a housing finance company. Because it was relating to bonds, it was put under other income. Subsequently in discussion with auditors, they decided to reclassify it under sales and admin.
Okay, it doesn't impact the recurring nature in how you recognize other income.
No, it doesn't recognize that.
Okay, I'll join the queue. Thanks a lot.
Thank you.
Thank you very much. Next question is on the line of Venugopal Garre from Bernstein. Please go ahead.
Hi, Mr. Mondal. Congratulations on a good quarter.
Thank you.
Just two small questions. Firstly, on the cash flow perspective, especially in terms of what you intend to use towards investments excluding CapEx. What are the planned investments for this year, including equity contributions towards, let's say, Hyderabad Metro, which would be some of what would be left as well as anything for L&T Finance, et cetera?
No, I don't think we are measuring anything for L&T Finance. See, L&T Finance, typically what happens, when will they require equity? Number one, if their growth rates are so fast that their internal generations can't meet with that, then they'll go to the market to get money, and obviously their growth rates are not what it used to be, number one. As far as L&T Finance is concerned, I don't think we are looking at any equity investment. Hyderabad Metro, yes, it will take a few INR 100 crores maybe.
That's the only thing, right?
Yeah, that's the only large thing. At the parent level, we continue to buy approximately what? Around INR 1,500 crores of fixed asset every year, typically. That's CapEx at the parent company level.
Got it. Sir, secondly, I remember in 1Q you mentioned that was election quarter, so you were seeing some tight payment environment, especially from these government projects, and otherwise you could have done a better revenue is what you mentioned. Is it now easing, in terms of the payments, et cetera, from state governments, et cetera? Is that environment easing as you're concerned? Would that play a role per se, in terms of you being able to accelerate revenue growth in the second half?
Frankly, it has not eased as such. It has not eased yet. At the same time, we had not assumed that the payment situation would significantly improve during the course of the year, and our revenue guidance was not based on that either. That's why we're still holding on to our revenue growth guidance of between 12%-15%.
Sir, lastly, if I may, especially this order environment, you have done much better. You've done quite well in the first half, and we've seen a lot of acceleration actually post September last year. Is this more a market share gain situation you're seeing? By which I mean to say is that ex-power, maybe power, so exclude power, you're generally seeing competitive intensity, number of bidders, et cetera, across your projects being lower, and would that be sort of positive for margins in future when they or would it be too positive to think of it that way?
Order inflow gains has largely come from Power and Hydrocarbon, if you don't consider the services business. Part of it has also come from REIT, largely Power, and I think everybody's aware of the two large orders that we got in Power. Hydrocarbon, of course, they've got some significantly large international orders as well. As far as core infrastructure is concerned, it's not that we have particularly grown.
Mr. Mondal, not for this particular quarter, actually. We're talking about those trailing couple of quarters, because you've been seeing significant gains.
Even in H1, it's not that we have grown in H1 either.
Okay. Thank you. Thank you so much.
Thank you, Venu.
Thank you. Next question is from the line of Abhishek Puri from Axis Capital. Please go ahead.
Congrats, Arnob.
Thank you.
Just a couple of things. One, in terms of the order prospects that you mentioned, in heavy engineering, the deferred projects, could you specify which ones are them? In the defense business also, we've been reading which submissions have happened for the submarine. When are they expected?
Okay. As far as heavy engineering is concerned, typically, it's not that they bid for billion-dollar projects. Typically, their project sizes that they bid for vary between INR 50 crore-INR 100 crore or so. A number of those, around maybe INR 400 crore projects, have got deferred in Q2, that they're expecting to get awarded in Q2, which didn't happen. It's not as if it's very blockbuster, but for that particular business, yes, it does bite them a bit, even though their order book is still very healthy today. As far as defense is concerned, Strategic Partner, I don't think we're in any position to take any call on that. We'll have to wait and see. I don't think the government has yet made up its mind on various other things as far as which Strategic Partners they'll invite to bid in which program.
As far as submarines are concerned, your guess is as good as mine. I don't think it's going to happen in a hurry.
Okay. I have two more questions, one on the IDPL part. CPPIB preference share conversion, when it is expected and valuations, any idea on that has been decided, numbers have been decided there or no?
Numbers have not been finalized yet, but we are progressing towards that.
What is the long shot date, sir?
It will happen this year. Hopefully in Q3.
Q3.
Hopefully.
Okay. The other question is on the borrowing that your slide number 30 shows. For the others part of the business, I think the financial services is showing a decline, whereas the others have increased by INR 93 billion. I'm assuming it is largely for Mindtree.
Mindtree, we already added the cash end of last year itself, so that cash got depleted. The increase in borrowing that you see, to a large extent, it has been, number 1, used to again build up cash buffers, and secondly, you would notice that in the current year, particularly in H1, the working capital has consumed a fair bit of cash as well. That's also led to an increase in borrowings.
Okay. In terms of that vendor financing support, are you seeing the stress becoming worse or is it getting better or how do we look at it? Because it is eating away a large part of our cash flow from operations.
Yeah. Firstly, Abhishek, it is not vendor financing support. It is just that we are not accepting unduly long credit periods from them, but we still get some credit period.
Yes, sir.
Be that as it may, I don't think it's deteriorating, but it's not yet seen a significant improvement. Now that there is reasonable liquidity in the market, but the credit flows are not happening. Hopefully, if credit flows start happening, if liquidity starts moving, particularly into the SME sector, then I think we could see some improvement there.
Got it, sir. Thanks so much, and all the very best.
Thank you, Abhishek.
Thank you. Next question is in the line of Inderjit Bhatia. Inderjit Singh Bhatia from Macquarie. Please go ahead.
Yeah, hi. Thanks. Thanks, Arnob, for the opportunity. Congratulations on good set of numbers.
Thanks, Inder.
First thing is just a quick clarification. We are not changing any guidance parameter, right?
Correct.
Okay. Secondly, on the order inflows, is my understanding right that we are including Mindtree, but we are excluding Electrical & Automation?
Yeah, correct.
That should be the basis for calculating the order inflows for the year?
Order inflows and revenues.
Okay. The second is on the revenue side. Do you think that basically our guidance assumed that this INR 16,000 crores of orders in Andhra and Coastal Road will start to give us some revenues in the remaining part of the year? If that does not happen, does that put our guidance at risk?
We had assumed that both these would contribute significantly.
Okay.
We had assumed that. At the same time, there are other projects where the execution has been better as well. All things considered, at the end of every quarter, we do a business by business assessment of how the remaining part of the year is likely to pan out and when we aggregate all that, we find that we're in a position to maintain our guidance.
Sure. On working capital, do we think we can go back to that, the comfort zone was that 18%-20% kind of a band? Do you think that the environment is conducive for us to go back to that level by end of this financial year?
Inder, I would not like to speculate on that. Suffice to say that we are trying to exert every effort to be in that band.
Got it. The final question is on margins. In quarter one also when our infra margins were declining year-over-year, it was attributed to early stage in the mix of those early-stage revenues, some extra charges that we are taking. Some of that hopefully are going out and hydrocarbon is doing well. In that context, do we think that there is an upside?
To potentially our margin guidance of flat in the core business, core E&C business?
No, I think we had factored in all that at the end of Q1 itself.
Okay. Thanks a lot, Arnob.
Thank you, Inder.
Thank you very much. Next question is from the line of Aditya Bhartia from Investec. Please go ahead.
Hi, good evening, Arnob.
Hi, Aditya.
Arnob, while the order pipeline looking strong, are you seeing risk from government deferring projects the next few quarters? Is that a risk that you're seeing?
Yes, it is a risk. Absolutely correct. In fact, order deferrals, we have seen that even in Q1 and Q2. In spite of the fact that we have one of a share, what you say is absolutely correct. The risk of award deferrals is very real, and that could pose a risk to our order inflow numbers, guidance numbers. Frankly speaking, with INR 300,000 crore plus unexecuted order book, a few thousand crores here and there, INR 10,000 crore-INR 20,000 crore deferrals is not something which will shake our foundations.
Okay. The pipeline is strong.
Pipeline is strong.
Right. In terms of payments also, are you seeing any delays from government side?
Till now, no, because we are getting our payments reasonably well, reasonably well in the circumstances. There are delays on practically every payment, and being a large company, we tend to be the immediate target of payment delays.
Mm-hmm. that you attributed bulk of working capital increase to quicker payment to payables, which essentially means that your receivables haven't really gone up drastically. In this kind of an environment, are you seeing a possibility of that also starting to happen?
I would not like to speculate on working capital. It's one of the most difficult parameters to control. The control has to be exercised on hundreds of sites that we execute at any point of time, and so many different variables are there. Please don't ask me for a view on any numbers or a number of days.
Sure. Arnob, you've spoken about monetization of commercial real estate at Seawoods. Is this one single chunky transaction? If that's the case, what could be the value of the same?
Yeah, there was a chunky transaction, something close to INR 500 crore or so.
Okay.
I'm sorry, Aditya, your voice was breaking.
Your voice is breaking, Aditya.
It is not, sir?
Okay.
Some last questions . While we understand that margin profile is still emerging, it would be great if you could share revenue, EBITDA, and PAT numbers, whatever you can share for H1 FY 2020.
See, Hyderabad Metro, we made a loss at the PAT level of around INR 180 crores. EBITDA was around INR 150 crores, approximately.
Okay. That's really helpful. Thank you so much.
Thank you.
Thank you. Next question is from the line of Kirthi Jain from Sundaram Mutual Fund. Please go ahead.
Sir, this trade table support which we are offering, is it like we get a discount from the vendors for paying earlier?
No, it's not that. Who's that? Madhangopal?
No, Kirthi, sir.
Kirthi. Sorry. It's not that we get a discount by paying early or anything like that.
Okay.
Those are terms of trade, contractual terms.
Okay. Because we will not get any rebate, sir, by paying early?
I don't think so. Because once a purchase price is fixed, I don't think any vendor would like to compromise on that.
Mm-hmm. Okay. Secondly, sir, this Hyderabad Metro, so this INR 180 crore kind of loss, so INR 1,800 crore per annum kind of loss.
INR 80 crores. INR 80 crores, not INR 180 crores.
Okay. When full commissioning, what should be the loss we should expect, sir, for FY 2021?
I think the margin profile is still emerging, Kirthi. You'll have to wait.
Okay
full commissioning happens, and then we'll try to give you a better picture.
Okay. That's it, sir, that's it from my side.
Thank you.
Thank you.
Thank you very much. The next question is from the line of Jonas Bhatt from PhillipCapital. Please go ahead.
Good evening, sir, and congrats on a great set of numbers.
Thank you.
Sir, just a few number-specific queries. If you can share what was dividend from subsidiaries in the standalone account part of the other income, sir?
As far as dividend from subsidiaries in standalone was concerned, in Q2, we got INR 675 crores against INR 420 odd crores in Q2 last year. The increase was on account of dividend from Mindtree that we got essentially. For the full year, the dividend was around slightly over INR 700 crores, and last year it was INR 790 crores, because last year we also got a dividend in excess of INR 300 crores from LTCL.
Okay. Sir, also, if you see the differential in margins for the E&A segment is just about.
On the EBITDA level is about 40 basis points, while that expands to almost 400 basis points on the EBIT level, implying that there's been some depreciation adjustment.
Yeah. See, once it is classified as assets held for sale, depreciation is not applicable because it's taken out of fixed assets.
Because this is very particular to Q2, though Q1 still had a positive charge.
Yeah.
Okay. Lastly, sir, if at all you can throw some light on, there's been a very small amount of order cancellations, roughly INR 3,500 odd crore. From what segments would that largely be driven by, sir?
It's less than INR 3,500 crores. Some other adjustments are there.
Okay.
Some part of that is due to, in Power Transmission and Distribution, we have got a large number of orders from the Saubhagya initiative, which also had a certain non-Saubhagya portion. That has got de-scoped to pure Saubhagya. We've adjusted the order values there. That has led to quite a bit.
Got it. Fine. That's it from my side. Thanks a lot.
Thank you.
Thank you. Next question is from Ankit Babina from Shubhkam Ventures. Please go ahead.
Yeah, good evening, sir.
Good evening, Ankit. You'll have to talk louder, please.
Am I audible, sir?
Yeah, now you're audible.
Okay. Yeah. Actually, my question was on your order inflows. In the first half, you have mentioned that including the services, the order inflow growth has been 16%. INR 87,000 crore versus INR 75,100 crore. If I see your last year H1 FY 2019 presentation, the order inflow figure was INR 78,100 crore. There has been a difference of around INR 3,000 crore. What is.
That figure is Electrical & Automation.
Okay. This is because of.
From order inflows, revenues, and margins, EBITDA.
sir, could you tell us for the last full year, what was the inflow of this particular segment so that we'll have a good base to compare for the full year?
You just refer to last year's Q4 presentation. The order inflow breakup is there.
Okay. Thank you so much, sir.
Yeah, thank you. It was around INR 6,000 crore, approximately.
Okay, sir. Thank you.
Thank you. Next question is from the line of Deepak Krishna from Goldman Sachs. Please go ahead.
Sir, good evening. This is Pulkit.
Hi, Pulkit.
Can you hear me?
Yeah, I can hear you, Pulkit.
Okay. Sir, all my questions are answered. Just one bookkeeping question. When you were talking about in your opening remarks, you mentioned that hydrocarbon, we've seen some good orders, including orders from Saudi Aramco and HPCL. Would it be fair to assume that this HPCL order that was announced this morning is already included in the order inflow?
We don't talk about specific orders, Pulkit.
You mentioned in your opening remarks, which is why I was wondering.
I mentioned ONGC, HPCL, Saudi Aramco. These are three major customers that we have in our order book. The order book is more than INR 50,000 crores.
No, so the orders that you announced this morning, you wouldn't be able to comment whether that's included or not?
No.
Okay. Thank you.
Thank you.
Thank you. Next question is on the line of Girish Achhipalia from Morgan Stanley. Please go ahead.
Good evening, sir. Thanks for the opportunity.
Hi, Girish.
Just a couple of questions. Firstly, on other business, if you can quantify what is the real estate revenue in first half?
As real estate is concerned, we don't give real estate revenue or revenues for CME and sub-segment-wise. We give segment-wise. Please don't ask me to get into further granular level details, Girish. I'll have to disappoint you.
Okay. Just a second thing on this buyback guidelines that SEBI has announced. Any thoughts that you could share as a management team as to how you think about it right now?
Actually, at this point of time, there's no question about going in for a buyback because we don't have sufficiently large excess cash to do that. In any case, with the new taxes on buyback, I think the arbitrage is no longer there. We'll be indifferent between buyback and dividend, frankly.
Thank you, sir.
Thank you.
Thank you. Next question is a follow-up from line of Renu Baid from IIFL. Please go ahead.
Yeah, hi, good evening, sir. Just a clarification, sir. For the effective tax rate, what should be assumed for the full year and for next year? Should 24%, 26% be assumed, or you think it could be a bit higher?
I think average tax rate of around 25%-26% is reasonable.
That should be reasonable at the company level.
Yeah, at the company level.
Yeah. Within this quarter, I'm not sure if I've missed this. On other income, we had seen a very sharp jump this particular quarter. Any particular line item that you would want to highlight which led to this jump in other income?
It's mainly treasury. Just like we had higher debt, we also had higher investments.
Right.
We liquidated some of those investments, and those led to gains as well.
Okay, just that. On the sequential basis also the jump was there. Largely treasury gains to that extent.
Essentially treasury gains, yes.
Sure. That's it from my side, sir. Thank you so much.
Thank you, Renu.
Yeah.
Thank you. Next question is on the line of Shreyas Pokharna from Canara Robeco Mutual Fund. Please go ahead.
Yeah. Thanks for the opportunity. Sir, just one question on Nabha. How much would be the receivables outstanding for more than six months?
Please don't ask us to give that level of information on individual projects or individual companies. We still have a large amount of receivables stuck with PSPCL. Even though we got a favorable order from the Supreme Court, they've only paid part of it.
Okay.
They not paid a large part of it yet.
Okay. On ongoing basis, we have been receiving the amount now?
Yeah. Ongoing basis, we are getting.
Okay. Thanks.
Thank you.
Thank you. Next question is on the line of Puneet Gulati from HSBC. Please go ahead.
Yeah, good evening. Thank you so much, and congrats on good numbers. Just wanted to check here, so for your working capital, is it fair to understand that despite government delaying, your receivables haven't gone up, it's essentially driven by payables?
Yeah, you are absolutely correct. This I had mentioned earlier that our philosophy is that if customers don't pay on time, we slow down execution.
Okay.
That's why we try our best to ensure that receivables don't balloon.
Okay. Under normal course of business and receivables, how much more revenue could you have added?
That's a hypothetical question. I'd not like to speculate on that.
Okay. Fair enough. The other thing is on your prospective order base, I have missed a number. Is it INR 5.2 lakh crore or INR 4.5 lakh crore?
5.2 lakh crores, of which infrastructure is INR 4.5 lakh crores.
Okay. Infra is 4.5%.
Infrastructure.
Okay. Great. That's all from my side. Thank you so much.
Thank you.
Thank you. The next question is from the line of Aditya Mongia from Kotak Institutional Equities. Please go ahead.
Good evening, sir.
Hi, Aditya.
Sir, I wanted a clarification. You now put the slide in which kind of tallies the segmental numbers with the overall numbers.
Yeah. Annexure.
Exactly, the annexure. Wherein for the first half, corporate overheads account for maybe a INR 4.5 billion kind of PAT impact. Is it fair to assume this could be the recurring rate of this line item incrementally or are there any one-offs inside?
Aditya, all this time you've been saying that you don't look at corporate, you only want PAT at a segment level. You are not bothered about corporate. Now you're asking about corporate, asking me to extrapolate corporate. There are so many variables there. Sorry, I can't get into that level of extrapolation.
Got that. Sure, sir. That was the only question from my side. Thank you.
Thank you. To ask a question, please press star and one.
I think no more questions. Looks like it.
Sir, we have a follow-up which has come up in the queue. Shall we take that?
Okay. One last question.
All right, sir. The next question is a follow-up from the line of Kirthi Jain from Sundaram Mutual Fund. Please go ahead.
Sir, the commodity prices in general, especially the steel, have corrected by 25%, 30%. How much margin improvement we can see from these factors over, let's say, next one year?
You're asking me something which is almost impossible to quantify on a forward-looking basis. Firstly, we will be booking inventories. It'll lie in inventory. It'll depend upon when that inventory is consumed. I think that's a question which I would not like to speculate on.
In Q4 results, you told that steel price increase jump was very significant and we lost in some of our fixed price contracts.
That is correct.
How would that mean?
Higher commodity prices are embedded in whatever inventories we have. Going forward, yes, hopefully we'll gain something. Probably the results of that will come in FY 2021 and all that will be baked into our FY 2021 EBITDA margin guidance.
Sure, sir. Thank you.
Thank you.
Thank you very much. As there are no further questions, I now hand the conference over to Mr. Mondal for closing remarks. Over to you, sir.
Thank you, [Zaid]. Thank you, ladies and gentlemen, for a very patient and interactive session. One last point which I forgot to mention in my opening and closing remarks was that once again, I'd urge you not to view everything on a quarterly basis as far as long-term interpolation is concerned. As all of you will be aware, both order inflows, revenues, and margins in our sort of business can be very lumpy and spiky on a quarter-to-quarter basis, not just because of the uncertainty in order inflows, but because of revenue and margin recognition norms. Be that as it may, I think all of us are very satisfied with the performance of the quarter just gone by, and I've talked about that enough in my opening remarks. With that, I'd like to close this session, and thank you once again.
Thank you very much, sir. Ladies and gentlemen, on behalf of Larsen & Toubro Limited, that concludes today's conference call. Thank you all for joining us. You may now disconnect your lines.