Multiple Road-Blocks Ahead

However, strong financials and a decent consolidated order book stand it in good stead in the long run

- Keerthi Sanagasetti

Supply disruptions and a complete halt in operations, owing to the COVID-19 lockdown, have hit several industries. Many had been already feeling the heat of the economic slowdown.

For infrastructure companies, awarding of domestic orders had taken a hit in the first nine months of FY20. The ongoing lockdown — which is hampering execution of projects — coupled with the Centre’s infrastructure spends likely being put on the back burner, have made matters worse for infra companies. The road to recovery for them is likely to be a long-drawn affair and a challenging one at that.

While infrastructure behemoth Larsen and Toubro (L&T) is among the best-placed to ride the recovery when it happens, investors can wait until there is more clarity on the lockdown and the progress of COVID-19 before investing.

Management commentary on the impact of the pandemic on order book and project execution, and March quarter results will be critical to watch.

In the recent market turmoil , the stock of L&T has corrected more than 50 per cent from its peaks recorded in May 2019, and at the current price of ₹812, it is trading at 11.7 times its trailing 12month earnings, versus a threeyear average of 23 times.

Near-term disruptions