L&T slumps after yesterday's new high
The price movements in L&T have been wild to say the least. The stock had hit a new high on 31st March at Rs.1301, and then yesterday too it hit a new high at Rs.1310 but today, it has slumped into the red, currently down 2% at Rs.1276.
Apart from profit booking and its L&T Finance being denied a banking license, there is now news that the company is likely to write off Rs.1.7 lakh crore order book by around 10% due to lack of approvals, aggressive bidding, frozen project execution by its customers, mainly in the roads, minerals and metals sectors. Some Rs.9000 crore worth of business in the construction sector is expected to be written off. These orders are from 5 developers – GVK, GMR and its subsidiary, L&T IDPL. These orders have not moved for over 2 years as the developers have been unable to resolve issues with the Govt. Prices has risen manifold since then and if it needs to continue on the projects now, it would need to renegotiate. In Fy13, the company had written off orders worth Rs.17,000 crore.
This is not expected to seriously hamper its earnings as the company feels, this write off will be more or less offset by Rs.10,000 crore worth orders for road building from Middle East. Plus, this will enable the company to concentrate on high margin and fast moving projects.