Larsen & Toubro Ltd. slumped in Mumbai trading, poised for its biggest fall in four years, after India’s biggest builder of power networks and airports reported profit that missed analysts’ estimates.
Larsen shares declined 7.46 %, headed for its steepest drop since July 2009, to 901.95 The stock was the biggest loser on the benchmark S&P BSE Sensex, which was little changed.
Net income fell 13% from a year earlier to 7.56 billion rupees ($127 million) in the three months ended June, Mumbai-based Larsen said in a statement today. Profit trailed the 9.06 billion-rupee median of 38 analysts’ estimates compiled by Bloomberg and declined for a second straight quarter.
Volatility in the Indian rupee, which declined 8.6 percent against the dollar last quarter, and uncertainty in the financial markets was affecting “investment sentiment,” Chairman A.M. Naik said in the statement. Prime Minister Manmohan Singh said last week currency volatility was the “immediate cause of worry” for his government as it seeks to revive economic growth from the slowest pace in a decade.
The rupee has lost more than 7 percent this year, the worst performance in Asia after the yen, prompting the Reserve Bank of India to intervene by selling dollars. The central bank last week also tightened liquidity in the banking system by raising two interest rates.
“We do not see this recovering soon as the government and private expenditure on infrastructure, industries continue to remain weak,” Anubhav Gupta, an analyst at Kim Eng Securities Pvt., wrote in a note on July 12 referring to the impact of a decline in fresh investments on companies such as Larsen. “This will continue to affect contractors’ earnings.”
Sales from building power plants and networks declined to 12.7 billion rupees, from 22.9 billion rupees a year earlier, the company said in the statement. Larsen reported expense on account of sub-contracting rose to 35.6 billion rupees in the period ended June 30, from 25.5 billion rupees a year earlier.
Source : Bloomberg.