Larsen & Toubro
BSE SENSEX
26,727
S&P CNX
8,236
9 January 2017
Update | Sector: Capital Goods
CMP: INR1,381
TP: INR1,600 (+15%)
Revisiting orders and execution estimates
Slowdown seen in 2HFY17; revival in FY18
Buy
Domestic Engineering & Construction (E&C) is likely to witness a slowdown in
execution in 2HFY17 (+12% in 1HFY17) on account of demonetization and
continued execution challenges. The impact may linger longer for the ‘Elite
housing’ segment (6% of order book).
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg. Val, INR m
Free float (%)
LT IN
935.5
1615 / 1017
1/-8/10
1,301.3
19.1
2845.0
100.0
We cut our FY17 order inflow estimates (+9% v/s +18% earlier) to factor in
weak defense, infrastructure and power generation orders. We, however,
expect a revival in FY18, led by higher government spending on infrastructure
and defense.
Maintain our Buy rating with a revised target price of INR1,600 (18x FY19E
standalone EPS), adding INR490 for the subsidiaries.
Financials Snapshot (INR b)
Y/E March
2016 2017E 2018E
Sales
1,020 1,092 1,250
EBITDA
103.5 113.1 141.7
Adj PAT *
41.8
50.2
58.2
EPS (INR)*
44.7
53.6
62.2
EPS Gr. (%)
-5.3
19.9
15.9
BV/Sh (INR)
470.2 510.3 555.5
RoE (%)
9.9
10.9
11.7
RoCE (%)
6.3
7.5
9.2
Payout (%)
28.7
21.8
24.0
Valuations
P/E (x)*
31.1
25.9
22.4
P/BV (x)
3.2
3.0
2.7
EV/EBITDA (x) 21.8
19.8
15.7
Div Yield (%)
0.9
0.8
1.1
* Consolidated
Shareholding pattern (%)
As On
Sep-16 Jun-16 Sep-15
Promoter
0.0
0.0
0.0
DII
38.6
38.7
37.1
FII
19.3
18.7
20.5
Others
42.2
42.6
42.4
FII Includes depository receipts
Domestic E&C execution to slow in 2H due to demonetization and execution
challenges.
1HFY17 E&C execution was up 12% YoY, driven by strong 20% YoY
growth in overseas E&C and 8% YoY in domestic E&C. However, domestic
infrastructure growth was subdued at 3% YoY due to extended monsoon, lack
of clearances and payment delays. A revival in 2HFY17 appears challenging
given the impact of demonetization, particularly on B&F (elite housing)
segment. Execution challenges seen in the Infrastructure segment (70% of
E&C sales) during 2QFY17 are likely to persist in 2HFY17.
Elite housing projects (6% of order book) to slow; 4Q could be worse.
Feedback from industry players indicates that November saw strong housing
sales. This will not sustain in December, adversely affecting cash flows for the
developer and in turn payments to EPC contractors, who would reduce the
pace of execution. Our dipstick survey on housing projects under construction
by LT in Mumbai indicates that projects which are in advanced stages of
construction or being built by reputed builders have seen minimal disruption.
This, however, is not the case for newly launched projects or developers going
through financial stress. Our sensitivity analysis reveals that a delay in 50% of
the projects would lead to a 4% earnings cut over FY17/FY18.
Order inflow guidance at risk; FY18 to see revival.
LT’s FY17 order inflow
growth guidance stands at INR1.55t (+15% YoY, 1HFY17: 12%). Our earlier
estimates were building inflows of INR1.61t (+18% YoY) on the premise that
large domestic orders (>INR15b) would see a sharp revival led by Defense,
Power generation and Infrastructure. However, we now expect these orders
to remain flat YoY at INR260b as: a) no new power plant orders are likely to
be finalized in 2HFY17 and b) defense and infra orders are seeing delays. We
thus cut our order inflow growth estimate to 9% YoY (+6% in E&C segment).
Maintaining Buy, revising target price to INR1,600 (earlier INR1,670):
We cut
estimates for FY17/18 by 7%/8% to factor in lower order inflows and
execution in FY17. Maintain
Buy
with a revised SOTP-based TP of
INR1,600
(E&C business at 18x FY19E). We believe that LT – one of our top picks in the
sector is the best play on a revival in domestic infrastructure spending.
Stock Performance (1-year)
1,850
1,600
1,350
1,100
850
600
Larsen & Toubro
Sensex - Rebased
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Ankur Sharma
(Ankur.VSharma@MotilalOswal.com); +91 22 6129 1556
Amit Shah
(Amit.Shah@MotilalOswal.com); +91 22 6129 1543

Larsen & Toubro
Domestic E&C execution to slow down in 2HFY17
Impact likely to linger longer for B&F segment
1HFY17 E&C execution was up 12% YoY, driven by strong 20% YoY growth in
overseas E&C and 8% YoY in domestic E&C. The growth was driven by power
(+29% YoY), hydrocarbon (+14% YoY) and heavy engineering (+35% YoY, off a
weak base). However, infrastructure growth remained subdued at 3% YoY as the
company was unable to book sales worth INR8-9b in Q217 due to a) extended
monsoon, b) the lack of customer willingness with regard to clearances and c)
payment delays given the adverse business environment.
While we were expecting a revival in 2HFY17, near-term execution would be
challenging given the impact of demonetization, particularly on the B&F
segment, where cash shortages would deter order book execution. Execution
challenges seen in the Infrastructure segment (70% of E&C sales) during 2QFY17
likely to persist in 2HFY17.
Exhibit 2: Consolidated E&C: Overseas orders pick up
marginally led by lower base effect of FY15
Overseas orders
965
731
805
10%
943
20%
152
-55%
-22%
29
67
145
-5%
-28%
8%
-3%
5%
131% 127%
393
171%
284
YoY growth
308
Exhibit 1: Consolidated E&C - Domestic order wins decline in
FY16 due to delay in finalization of orders in core sector
Domestic orders
57%
610
669
10%
-20%
670
-6%
537
25%
627
50%
YoY growth
297
313
Source: MOSL, Company
Source: MOSL, Company
Consolidated E&C: Order inflow mix in FY16/FY17 in favor of
overseas orders
Domestic
23%
Overseas
Exhibit 3: Consolidated growth in E&C orders v/s domestic
E&C orders
Consol E&C
50%
Domestic E&C
39%
30%
28%
27%
25%
20%
-15%
10%
7%
10%
9%
61%
77%
70%
72%
73%
-6%
FY14
FY15
FY16
FY17E
FY18E
FY14
FY15
-22%
FY16
FY17E
FY18E
Source: MOSL, Company
Source: MOSL, Company
LT witnessed a 50% increase in domestic E&C order inflow to INR943b in FY15,
driven by the finalization of large project orders in the power, rail, metros,
roads, MMH and T&D segments. These orders have started contributing
meaningfully from 4QFY16 (+22% YoY growth in domestic infrastructure). We
9 January 2017
2

Larsen & Toubro
expect this trend to continue into FY17, driving domestic E&C growth (+5% YoY
in FY17 v/s 4% in FY16).
Exhibit 4: Domestic E&C execution growth impacted
by constrained macros and flat orders over FY10-14
Domestic revenues (INR m)
30%
23%
15%
262
340
419
467
11%
1%
4%
-3%
471
457
476
YoY growth (%)
500
575
15%
5%
10%
56
37
24%
-34%
46
130
153
18%
Exhibit 5: Overseas E&C revenue registered robust growth
led by timely execution of overseas infra orders
Overseas revenues (INR m)
183%
213
162
6% 31%
7%
25%
227
YoY growth (%)
283
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E
Source: MOSL, Company
Source: MOSL, Company
Exhibit 6: Domestic E&C execution driven by power and
hydrocarbon in 1HFY17; Infra weak at +3%
Domestic Revenues (% YoY)
Exhibit 7: Overseas E&C revenue growth supported by
timely execution of orders in hand; +20% in 1H17
Overseas Revenues (% YoY)
Source: MOSL, Company
Source: MOSL, Company
For FY17, management is
guiding for 12-15% growth
in sales. However, we have
modeled in revenue growth
of 7% for FY17
For FY17, management is guiding for 12-15% sales growth. However, we have
modeled in revenue growth at 7% for FY17. We expect 6% growth in the E&C
segment, with domestic E&C estimated to grow at 5% YoY and overseas at 7%
YoY.
Large domestic projects won over past 2-3 years are expected to contribute
meaningfully in FY17. These include: (a) Western DFC order (INR67b; FY14), (b)
RRVUNL Chabra (INR57b; FY14), (c) MP Genco Shri Singajee Stage II (1,320MW,
INR50b; FY15), (d) NTPC Tanda boiler (1,320MW, INR19b), (e) NTPC Khargone
(1,320MW, INR56b), (f) Statue of Unity (INR30b), (g) Lucknow-Unnao
Expressway (INR16b), (h) NHAI road order Rewa-Jabalpur (INR26.5b), (i) ONGC
well platforms (INR27.1b) and (j) 22km bridge over Ganga in Patna (INR31b).
However, we note that there is slowdown in execution in the B&F segment,
given the demonetization impact over 3Q-4QFY17. However, the commercial
space has started to witness a pick-up in offtake over the past year.
9 January 2017
3

Larsen & Toubro
Exhibit 8: Key domestic project wins over last few years
Date
Mar-11
Jun-12
Apr-13
Apr-13
Apr-13
Dec-13
Jul-14
Jul-14
Sep-14
Sep-14
Oct-14
Oct-14
Nov-14
Mar-15
Mar-15
Mar-15
Jun-15
Jan-16
Jan-16
Mar-16
Mar-16
Jul-16
Jul-16
Jul-16
Oct-16
Oct-16
Oct-16
Description
Hyderabad Metro
6 laning of highway (Reliance Infra)
Solar PV plant (Tamil Nadu)
Western DFCC (L&T-Sojitz JV)
RRVUNL Chabra plant
Orissa road order - Sambhalpur
BSNL order for laying optic fiber network for defense
Cable stayed bridge across Mandovi river in Goa
MP Genco Sri Singajee Stage II
NTPC 1320MW Tanda Boiler
Electrification of WDFCC along with Sojitz (Rewari-Baroda)
Expressway project in UP from Lucknow to Unnao
Statue of Unity at Gujarat for Sardar Vallabhai Patel
NTPC Khargone 1320MW power plant
Delhi PWD for elevated corridor Phase III Barapullah elevated corridor
NHAI order for 287 km for Rewa-Katni-Jabalpur package
ONGC well platforms
22km bridge over River Ganga in JV with Daewoo in Patna
Electrification of WDFCC with Sojitz (JNPT - Vadodara)
Turnkey order for a residential project from a leading developer in Mumbai
Soitz L&T Gayatri Projects consortium Iqbalgarh-Vadodara (289kms) stretch
Mumbai Metro Phase III 2 packages: Colaba to Hutatma Chowk and Package VII
Lift irrigation project along with PES Engineers
1980MW NLC Ghatampur plant order for design, engineering, manufacture and
supply of boilers and aux package for Neyveli UP Limited
Supply and laying of water pipelines, waste water network, design and construction
of water and waste water treatment plant
Civil work for a cement plant in the AP
Civil tracks, electrification, signaling and station contract from western DFCC along
with Sojitz
Execution period
(months)
60
30
21
67
48
20
30
30
48
48
55
48
60
60
50
30
30
48
42
42
48
48
36
Size
(INR m)
85,000
20,400
21,000
55,000
56,890
13,000
24,420
15,470
50,000
18,850
25,920
16,300
29,890
55,800
16,640
26,500
27,150
31,000
12,130
20,180
47,440
52,730
18,490
38,600
14,970
11,310
37,990
Source: MOSL, Company
Overseas E&C growth in FY16 was robust at 31%, led by a sharp 40% increase in
order backlog in FY15 on the back of the INR50b Kuwait Oil Company order. We
expect overseas infrastructure revenue growth to moderate in FY17 as order
flows stabilize at lower levels (INR307b in FY16/FY17 v/s peak of INR393b in
FY14) and given delays in execution post the sharp fall in oil prices over the past
year. We build in 7% growth in overseas E&C execution for FY17.
9 January 2017
4

Larsen & Toubro
Exhibit 9: Key overseas projects won by LT
Date
Jun-13
Jun-13
Jul-13
Jul-13
Dec-13
Mar-14
Mar-14
Apr-14
May-14
May-14
Jul-14
Dec-14
Sep-15
Sep-15
Dec-15
Apr-16
Jun-16
Jul-16
Oct-16
Description
Midyan Gas project (Saudi Arabia)
Delma JV - road order
Riyadh metro - 41kms
4th package of Al Batinah Expressway
Qatar substation order - Kahrama
Batinah Expressway, Oman
ASHGAL road order. Qatar
Doha metro Gold line, Qatar
Bangladesh Gas power plant orders(225MW and 360MW)
Qatar substation order
Kuwait Oil Company – Oil Gathering Centre
EPC order from Algerian Transmission Utility
400MW Bangladesh gas plant order
Ballast less tracks for the Riyadh Metro
Detailed EPC for the GIS substation
PDO, Oman – Depletion compression Phase 2
Al Rayyan stadium in Qatar for the FIFA World Cup
Hazbah gas field project
Construction of overhead transmission lines and substation in Middle East
Orders for four wellhead platforms and upgrade 17 platforms in offshore fields
Jan-17
From Saudi Aramco
Execution
period (months)
36
36
48
36
36
36
36
54
45
36
45
30
48
48
24-36
40
36
Size (INR m)
16,500
15,000
82,500
20,650
29,350
15,500
36,550
45,100
28,800
14,700
50,760
13,770
17,000
10,700
10,380
24,790
23,760
67,000
17,210
~20,000
Location
Overseas
Overseas
Overseas
Overseas
Overseas
Overseas
Overseas
Overseas
Bangladesh
Overseas
Kuwait
Overseas
Bangladesh
Overseas
Overseas
Overseas
Overseas
Overseas
Overseas
Overseas
Source: MOSL, Company
9 January 2017
5

Larsen & Toubro
Order inflow guidance at risk
FY18 revival driven by continued impetus on infra spending by government
FY16 was a disappointing year as orders dipped by 12% YoY to INR1.37t. E&C
orders dipped by 15% YoY to INR1.04t, primarily due to a sharp 22% YoY drop in
domestic E&C orders (>INR15b) to INR0.73t (-22% YoY). Overseas E&C orders
were up 8% to INR0.3t. The drop in domestic E&C orders was driven by a steep
45% fall in large orders to INR230b.
Exhibit 10: E&C order inflow break-up – domestic vs. overseas
Domestic
Overseas
284
152
537
FY12
145
670
FY13
393
627
FY14
943
308
731
297
313
805
965
FY15
FY16
FY17E
FY18E
Source: L&T, Motilal Oswal
We were earlier building in orders growth of 18% YoY for FY17, driven by a
pickup in large orders in power generation, defense and infrastructure. While LT
has won the NLC Ghatampur 1.98GW boiler orders (INR20b share), we do not
expect any other order to be awarded in 2HFY17 in the power generation
equipment sector. Within defense, we were building in orders of INR150b,
including the INR45b order for the K9 Vajra guns and INR80b for landing
platform docks. While we continue building in the order for the artillery guns in
our FY17 estimates, it appears unlikely that the order for LPDs would be
finalized this year. We now build in 9% YoY order inflow growth and 6% YoY E&C
growth for FY17.
Exhibit 11: Domestic E&C orders - Large orders (>INR15b) fell sharply in FY16 and unlikely
to return to FY15 levels
Base orders
Large Orders
410
145
525
FY13
67
561
533
227
504
FY16
255
365
550
600
FY14
FY15
FY17E
FY18E
Source: L&T, Motilal Oswal
9 January 2017
6

Larsen & Toubro
Base order intake in
domestic E&C (excluding
large project wins of
INR15b+) has averaged
~INR500-550b over past
four years
For LT, the base order intake in domestic E&C (excluding large project wins of
INR15b+) has averaged ~INR125b-130b/quarter over the past 10-12 quarters.
Volatility in reported intake is largely a function of large project wins, and pick-
up in intake will thus be led by large-sized projects in segments like transport
infra (metros, railways, roads, ports), process industries (metals, material
handling), power (thermal, hydro), hydrocarbons and defense.
Exhibit 13: Consolidated E&C: Overseas orders head lower in
FY15 on a fall in oil prices; FY16 largely flat
Overseas orders
965
731
805
10% 20%
-5%
-55%
29
67
152
145
393
-28%
284
8%
308
-3%
297
5%
313
131% 127%
171%
YoY growth
Exhibit 12: Consolidated E&C: Domestic orders fell 22% YoY
post sharp 50% jump in FY15
Domestic orders
57%
610
669
10%
537
-20%
670
25%
-6%
627
943
50%
YoY growth
-22%
Source: MOSL, Company
Source: MOSL, Company
Exhibit 14: Consolidated E&C - Domestic base order inflows
saw some revival in 2QFY17 (INR b)
Domestic
Overseas
Exhibit 15: Domestic E&C - Large orders yet to pick up; base
orders stable (INR b)
Base Orders
Large Projects (INR15b+)
Source: MOSL, Company,
Source: MOSL, Company,
Exhibit 16: Domestic E&C order split by sub segments
Description
Urban Infra
India T&D
Water/Waste Water and Pipelines
Metal and material handling
Heavy Engineering
Roads
Total
INR b
200
100
100
50
50
50
500-550
Source: : MOSL, Company
9 January 2017
7

Larsen & Toubro
For 3QFY17, we estimate
LT’s order intake at
~INR2800b and E&C orders
at INR200b
For 3QFY17, we estimate LT’s order intake at ~INR280b and E&C orders at
INR200b. This takes into account INR184b of announced E&C orders and IN660b
of unannounced orders. With our estimate of 3QFY17 orders at INR280b, order
inflow for the quarter would be down 27% YoY.
Exhibit 17: E&C consolidated intake (INR b): We have
assumed unannounced orders at INR140b (4-quarter
average)
Order Announced
Un Announced Orders
Exhibit 18: E&C consolidated intake run-rate flat YoY in FY16
due to a decline in large orders (INR b)
Average intake
INR170B
INR250B
INR330B
Source: MOSL, Company
Source: MOSL, Company
Exhibit 19: Bid pipeline for LT as at end-1QFY17 (USD b)
Order prospects as at the start of 1QFY17
Infrastructure
---Transport Infra
---Urban Infra
---Water
Power Generation
Power T&D
Hydrocarbon
Heavy Engineering. Incl. defense
MMH
Others
Total order pipeline
USD b
40
20
10
10
7
13
12
5
4
4
85
Source: MOSL, Company
9 January 2017
8

Larsen & Toubro
Exhibit 20: 3QFY17 orders announced by LT
Date
3Q17
3Q17
3Q17
3Q17
3Q17
3Q17
Comments
Orders under DDUGJY and IPDS, OPTCL for electrification works in five cities, Solar PV plants EPC in Raj and
Uttarakhand, Madhyanchal Vidyut Nigam for Lucknow
Construction of medical college and a 500 bed hospital from Bihar Medical Services - MEP and civil works
to be done
EPC order from Rural Water Supply and Sanitation Board of Odisha for water supply to rural areas of
Balasore, Bhadrak, Puri, Bolangir and Keonjhar districts via water treatment plants, water storage and
pipelines
EPC order from SAIL for integrated water circulation system of a steel melt shop in Bhilai Steel plant
EPC order for special bridges from a prestigious client for construction of 4 lane road bridge across the
Durgam Chereruvu lake inclusive an approaching viaduct
EPC for Department of Water resources for execution of mega lift irrigation schemes in Odisha. Scope
includes survey, investigation, design and installation of pumping systems, rising and gravity main lines,
distribution network to bring more than 36000 hectares under irrigation. Another order from Rajasthan
Urban Infra for waste water infra works at Jhunjhunu and includes construction of waste water treatment
plant, effluent resue and related works. An order from Gujarat Water Supply for Narmada River Basin
based bulk water pipeline Scheme - includes laying 108 kms of pipeline network traversing Dahod and
Chota Udaipur
Electrification project under IPDS and DDUGJY awarded by North Bihar power distribution Limited and
South Bihar power distribution Limited
EPC order from Inland waterways authority of Indiafor construction of new navigational lock at Farakka
Supply erection testing and comissioning of equipment package at Paradip Port
Orders under DDUGJY and IPDS, OPTCL for electrification works in five cities, Solar PV plants EPC in Raj and
Uttarakhand, Madhyanchal Vidyut Nigam for Lucknow
Contrn of medical college and a 500 bed hospital from Bihar Medical Services - MEP and civil works to be
done
EPC order from Rural Water Supply and Sanitation Board of Odisha for water supply to rural areas of
Balasore, Bhadrak, Puri, Bolangir and Keonjhar districts via water treatment plants, water storage and
pipelines
EPC order from SAIL for integrated water circulation system of a steel melt shop in Bhilai Steel plant
Value (INR m)
5,710
5,140
3,970
2,980
1,460
14,220
3Q17
3Q17
3Q17
3Q17
3Q17
10,360
3,590
2,220
5,710
5,140
3Q17
3Q17
3,970
2,980
Source: Company, MOSL
Exhibit 21: E&C order inflow over FY14-18E
Orders - L&T Group
Infrastructure
YoY Growth (%)
Power
YoY Growth (%)
Metal and Material Handling - Process
YoY Growth (%)
Heavy Engineering
YoY Growth (%)
Hydrocarbon (Consolidated orders from AR14)
YoY Growth (%)
Engineering & Construction
YoY Growth (%)
FY14
813,730
43%
44,090
-46%
27,240
-48%
36,870
-7%
97,750
37%
1,019,680
25%
FY15
857,630
5%
151,250
243%
61,360
125%
49,890
35%
107,160
10%
1,227,290
20%
FY16
848,170
-1%
27,020
-82%
36,610
-40%
22,950
-54%
104,470
-3%
1,039,220
-15%
FY17E
853,380
1%
36,871
36%
36,610
0%
60,000
161%
114,917
10%
1,101,778
6%
FY18E
873,718
2%
86,227
134%
42,102
15%
69,000
15%
126,409
10%
1,197,455
9%
FY18 orders to be supported by increased infrastructure spending by
government
Infrastructure spending by the government is likely to see continued emphasis
going into FY18 with higher budget allocations likely for railway, roads, defense,
urban infrastructure and affordable housing. With L&T’s presence across all
these areas, we expect order inflows to improve in FY18.
9 January 2017
9

Larsen & Toubro
Exhibit 22: NHAI annual spend (INR b)
NHAI spending(INRb)
YoY (%)
145%
36%
-35%
-1%
287
FY14
283
FY15
694
FY16
49%
323
FY12
211
1033
FY17e
FY13
Source: MOSL, NHAI, Budget documents
Exhibit 23: Indian Railways annual spend (INR b)
Rail spending(INRb)
YoY growth(%)
975
565
9%
52%
1210
470
493
5%
520
24%
5%
FY14
FY12
FY13
FY15
FY16
FY17e
Source: MOSL, Budget documents
Exhibit 24: Ministry of Urban Development annual spend
Ministry of Urban Devlpt
YoY(%)
54%
166
150
78
83
7%
91
10%
98
11%
7%
FY12
FY13
FY14
FY15
FY16
FY17e
Source: MOSL, Budget documents
9 January 2017
10

Larsen & Toubro
Exhibit 25: Defense spending (INRb)
Revenue
Capital
Capital as % to total spend
Source: Budget documents, MOSL
We highlight some large orders which are likely to be placed over the next 1-2
years across Defense, Infrastructure and Power generation. L&T needs to win
some of these larger sized orders in order to growth its order inflows by 15%
(MOSLe) in F18.
Exhibit 26: Defense opportunities over the next 1-2 years
Description
155mm/52 caliber Self-propelled Howitzer guns- K9 Vajra
Corvettes
Landing Platform Docks(LPD's) - FY17 orders for 2 for private
Dhanush 155mm, 52 caliber - Advanced Towed Artillery
Guns
155mm/52 caliber Towed Gun System
M777 Ultra-light Howitzers
155mm/52 caliber Mounted Gun System(MGS)
Aircraft Carrier - 65000 ton
Battle Management System
Tactical Management system
Future Infantry Combat Vehicle
Project 75I - Air Independent Propulsion submarines
L 70 anti-aircraft guns
Kilo class submarine upgrade and retrofit
Total
INR b
48
80
120
80
150
145
158
400
100
500
600
170
50
2,601
No. of
Units
100
8
2
514
1500
50
814
1
6
428
4
Source: MOSL, Industry
9 January 2017
11

Larsen & Toubro
Exhibit 27: Power Generation equipment pipeline over next 1-2 years
Description
NTPC Katwa
Tangedco -- Udangudi
UPRVUNL - Panki
UPRVUNL - Jawaharpur Thermal Power Extn
UPRVUNL Obra Stage C
Mahagenco Bhusawal
NTPC Pudimadaka, Vizag(AP)
NTPC Barethi - go for retendering
Satluj Jal Vidyut Nigam Limited - Buxar
NTPC /JSEB Patratu Thermal Power Station Phase 1
Reliance Power Tilaiya UMPP
Orissa UMPP - Bedabahal
NTPC Tanda - Phase II
Total
In MW
1,320
1,320
660
1,320
1,320
660
4,000
2,640
1,320
2,400
4,000
4,000
1,320
26,280
Rs m/
MW
45
50
56
79
80
44
25
31
55
45
25
46
45
Value
(INR b)
59
66
37
104
106
29
101
82
72
108
100
184
59
1,108
Source: Industry, MOSL
Exhibit 28: Large infrastructure projects in the pipeline over next 1-2 years
Segment
Description
Rail
CST - Panvel Elevated corridors
Rail
Bandra - Virar Elevated corridors
B&F
Shivaji Memorial, Mumbai
Heavy Civil
Mumbai Trans Harbor Link (Sewri to Navi Mum)
B&F
Navi Mumbai International Airport
Road
Mumbai Coastal Link road
Metro
Mumbai Metro Phase 4 Wadala - Ghatkapor -Thane- Kasarvadali(32kms)
Metro
Mumbai Metro Phase 2B DN Nagar-Bandra- Mankhud(24kms)
Metro
Delhi Metro Phase IV
Metro
Ahmedabad - Gandhinagar metro link
Metro
Nagpur Metro Phase 1
Airport
Delhi Airport expansion
Airport
Mumbai Airport expansion
Road
Mumbai Pune Bypass (12kms)
Roads
Nagpur - Mumbai expressway
Total
Value (INR b)
146
195
36
178
120
120
145
110
55
65
87
10
10
50
300
1,627
Source: MOSL, Industry
Dipstick survey of B&F projects suggests dip in execution post
demonetization
B&F projects account for ~20% of order book (elite buildings: 6% of order book,
INR150b). We thus visited B&F project sites across Mumbai where L&T Construction
is the EPC contractor. Following is the key feedback from our site interactions and
also from our discussions with EPC contractors in the B&F sector:
Work had come to a standstill post demonetization across project sites, as labor
payments (primarily by sub-contractors) are typically done in cash. Smaller (tier
2/3) developers are hurt more than the tier 1 real estate developers/EPC
contractors. The situation is returning to normal, with some sites making
payments directly into bank accounts.
9 January 2017
12

Larsen & Toubro
Labor shortages have also hurt execution post demonetization, with laborers
moving back to their villages.
EPC contractors have begun making payment via cheques to laborers. This
should help ease the situation over next few quarters – a recent government
directive requires making payments only by cheques.
Payments for government projects are received on time, but execution is
impacted due to raw material shortages given restricted truck movement.
Payment from real estate developers were done on time in November since
many developers sold flats by back-dating the transactions. Payments to EPC
contractors have also come through in November and thus 3QFY17 sales are less
impacted. However, with housing sales slowing from December and payments
to contractors not coming through, Q4 would see a bigger impact.
Private projects have been slow over the past year. The situation is likely to
remain the same over next year as well, given the impact of demonetization.
Our dipstick survey on housing projects under construction by LT in Mumbai
indicates that projects which are in advanced stages of construction/being built
by reputed builders have seen minimal disruption which is not the case for
newly launched projects or developers going through financial stress.
Exhibit 29: Real estate EPC contractors and key clients
Name of company
L&T
Shapoorji Paloonji
Vascon Engineers
Pratibha Construction
Ahluwalia Contracts
Man Infra
Supreme Infrastructure
Ramky Infra
IL&FS Engineering
Clients
Lodha, DB Realty, Oberoi Realty, Godrej Properties, Dheeraj
Godrej Properties, DLF
Various developers with projects in Pune
Runwal, Lodha and Tata Housing
Logix, Ansal, Uppal, Dheeraj
DB Realty, Nirmal
Ramprastha, BPTP, RNA
Mantri, Indiabulls Real Estate
Emaar MGF
Source: MOSL, Industry
9 January 2017
13

Larsen & Toubro
Exhibit 30: Housing project site in Prabhadevi (3 towers of 68 storeys each) being built by L&T Construction, where
construction has stopped over last 3-4 weeks
Source: MOSL, Industry
Exhibit 31: Housing project site in Prabhadevi (3 towers of 68 storeys each) being built by L&T Construction, where
construction has stopped over 3-4 weeks
Source: MOSL
9 January 2017
14

Larsen & Toubro
Exhibit 32: Large housing complex in Wadala, where work remains largely unaffected post demonetization
Source: MOSL
Exhibit 33: Large housing complex in Wadala, where work remains largely unaffected post demonetization
Source: MOSL
9 January 2017
15

Larsen & Toubro
Exhibit 34: Large housing complex in Parel where work
remains unaffected post demonetization; most of the flats
have been sold
Exhibit 35: Large housing complex in Parel where work
remains unaffected post demonetization; most of the flats
have been sold
Source: MOSL
Source: MOSL
9 January 2017
16

Larsen & Toubro
Exhibit 36: Large housing complex in Goregaon where work remains unaffected post demonetization; Project on the verge of
completion
Source: MOSL
9 January 2017
17

Larsen & Toubro
Exhibit 37: Large housing complex in Powai where work remains unaffected post demonetization; Phase I partially completed
and Phase II yet to start
Source: MOSL
9 January 2017
18

Larsen & Toubro
Sensitivity analysis of slowdown in real estate on earnings
Out of LT’s order book of INR2.5t, INR550b is toward the B&F segment (60%
from the government), which includes affordable housing, hospitals, factories,
public spaces, airports and elite housing. As a real estate developer, LT also sells
~INR16-18b of projects (50% EBITDA margins), with ongoing/to be launched
projects in Parel (Mumbai), Powai (Mumbai), Chennai and Bangalore.
Our analysis reveals that in a worst-case scenario of 50% of these projects
getting delayed by one year, the impact on EPS is ~4-5% over FY17/FY18.
Exhibit 38: Impact of 50% delay in projects in elite buildings and L&T Realty projects
Impact of demonetization on B&F and EPS impact (INR m)
Description
L&T Order book (Q416)
Infrastructure order book
--Of which B&F order book
Elite Housing
Execution period
Description
Sales booked from Elite housing
50% of sales delayed
Impact on L&T Consolidated sales
Loss of EBITDA due to delay in sales (11% margin)
Impact on L&T Consolidated EBITDA (a)
L&T Realty
Annual Sales
50% decline in sales
Impact on L&T Consolidated sales
EBITDA margin (50%)
Impact on L&T Consolidated EBITDA (b)
Impact from B&F and Realty (a + b)
INR m
2,499,490
1,873,730
550,000
150,000
48 months
FY17
37,500
18,750
2%
2,063
2%
% of total
100%
75%
22%
6%
Comments
FY18
37,500
18,750
1%
2,063
1%
FY19
37,500
18,750
1%
2,063
1%
16,000
8,000
1%
4,000
3%
5%
16,000
8,000
1%
4,000
3%
4%
16,000
8,000
1%
4,000
2%
4%
Source: MOSL
9 January 2017
19

Larsen & Toubro
Lakshya FY16-21: Five-year strategic plan
Focus is on improving sales, margins and RoEs
Sales targeted to double to INR2t by FY21
Revenue CAGR target is 12-15% until FY21, which implies doubling of revenues
from the FY16 level of INR1t.
We build in FY16-21E sales CAGR of 12%.
Focus on profitable execution of order book; to continue selectively taking
orders.
Will not enter any new line of business and BOT projects. The company to
increase focus on fast-growing segments of
a) defense, b) nuclear, c) smart
world and telecom.
Margins (ex. services) to rise from 10% in FY16 to 11.2% in FY21
FY17 margin targeted at
10.5% (FY16: 10% ex
services); to further expand
by 50-70bp until FY21
FY17 margin targeted at 10.5% (FY16: 10% ex services); to further expand by 50-
70bp until FY21 to reach 11.2%. We build in margins of 11.1% in FY21.
FY17 margin improvement of 50bp, driven by:
a) hydrocarbons
turning
profitable versus the INR2.5b loss in FY16,
b) heavy engineering,
which reported
a loss in FY16 due to LD provisions, not repeating its dismal performance, c)
MMH
- FY16 had a low starting order book, and negative leverage thus hurt
margins. With higher opening backlog, margins are likely to improve.
Shipyard and forgings
businesses are incurring losses, but should turn around
post orders wins over next two years. LT - MHI Turbine generator is also in
losses; exploring export opportunity with MHPS, which should help return the
subsidiary into profits.
Asset sales and divestment will also help reduce losses and improve margins.
Value unlocking through listing and divestment of assets; RoEs to increase
from 12% in FY16 to 18% in FY21
L&T General Insurance
sold to HDFC Life for INR5.5b. The business was incurring
a loss of INR1b, which will now cease. Expect IRDA approval to come through in
2Q-3QFY17
Kattupalli Port:
Has entered into an agreement with Adani Ports for the sale.
Will demerge post court approval, and the process is likely to complete by
3QFY17. Current PAT loss at
INR2.5b.
Road assets:
12 operational road assets to be taken into an investment trust
and divested to long-term pension funds. Currently, INR20b of sales and INR6b
of loss for the road assets.
Nabha Power:
Likely sale in FY18 post closure of legal disputes with the Punjab
discoms. FY16 PAT of INR1.9b.
IT& TS:
L&T Infotech to be listed in FY17, and L&T Technology Services listing to
follow over next few quarters.
Working capital, cash flows and dividends
Target is to bring down WC from 24% currently to 18%.
Aim is to increase free cash flows; proceeds from asset sale would be paid out to
shareholders via higher dividend payouts.
9 January 2017
20

Larsen & Toubro
Well positioned to benefit from economic recovery
Maintaining Buy
LT is exposed to several levers across business/geographical segments, and has
emerged as the E&C partner of choice in India, which provides a robust foundation to
capitalize on the next leg of the investment cycle.
Management’s intent is to improve consolidated RoE to 18% (12% in FY16) by FY21.
Capping investments in concession business/asset monetization are important parts of
this strategy.
Manufacturing businesses (like Shipyard, Power BTG and Forgings) also offer
interesting possibilities in the longer term. Many of these businesses are difficult to
replicate, and LT is strongly positioned as a dominant player.
To factor in lower order inflows and execution, we cut our estimates by 7%/8% for
FY17/18. We model consolidated EPS at INR54 for FY17 (+20%) and INR62 for FY18
(+16%). We maintain Buy with a revised SOTP-based price target of INR1, 600.
Exhibit 39: LT SOTP valuation
Method
Construction Business
L&T Standalone
L&T Hydrocarbons
Service Segments
L&T Infotech
L&T Technology Services
Finance Services
Sapura Shipping
L&T Realty
Asset Ownership
IDPL
Power Development Projects
Manufacturing Ventures
Power Equipment
Shipbuilding / Container Port
FY19E PER (x)
FY19E PBV (x)
15
1.0
1.0
43
29
6
46
31
7
-107
1,600
Expect industry project awards to sustain at
10-12GW pa
Increased possibility of Defense (Naval) orders
Possibility of Nuclear project awards to
commence in FY17
FY19E PER (x)
FY19E PER (x)
FY19E PER (x)
FY19E PER (x)
FY19E PBV (x)
FY19E PBV (x)
FY19E PER (x)
Valuation
multiple
18.0
18.0
12.0
12.0
1.5
1.5
15.0
Value
(INR b)
1,030
61
112
79
101
1
57
Value
(INR/sh)
1,101
65
120
85
108
2
61
Rationale
Valued at last ten year average P/E multiple
At par to mid tier IT companies; excl. stake sold
via OFS
At par to mid tier IT companies excl. stake sold
via OFS
At discount to peer group given relatively
lower ratios
FY19E PBV (x)
FY19E PBV (x)
0.5
1.0
36
31
38
33
At 0.5x Book Value to capture the macro
volatility and losses
At Book Value, given Case 2 bid
Special Steel and Heavy Forgings
FY19E PBV (x)
Less: Holding Company Discount of 20%
Total
Source: MOSL, Company
9 January 2017
21

Larsen & Toubro
L&T: Operational Metrics (INR Million)
FY12
FY13
FY14
1,020
628
383
24.1%
-6.2%
163.7%
624
471
153
7.4%
4.2%
19.0%
628
67
561
1,272
23.6%
851
14.2%
12.0%
13.1%
43.7
49.3
6.9
4.0
-7.2
-4.5
50.0
15.6
12.8
25.5
FY15
1,227
943
284
21.4%
50.2%
-25.8%
619
457
162
-0.8%
-3.0%
6.0%
943
411
532
1,554
22%
920
8.0%
8.4%
11.6%
41.1
47.2
11.5
4.9
-6.5
10.8
26.5
13.3
11.2
22.9
FY16
1,039
731
308
-15.3%
-22.5%
8.4%
689
476
213
11.3%
4.2%
31.3%
731
227
504
1,369
-12%
1,020
9.9%
8.7%
9.7%
36.7
44.7
15.0
5.2
-4.8
-5.2
34.5
11.4
9.9
21.5
FY17E
1,102
805
297
6.0%
10.0%
-3.4%
727
500
227
5.5%
5.0%
6.7%
805
255
550
1,486
9%
1,092
7.1%
8.4%
9.7%
39.5
53.6
16.8
6.7
-4.2
-11.6
45.9
10.7
10.9
21.5
FY18E
1,197
885
313
8.7%
10.0%
5.1%
858
575
283
18.1%
15.0%
24.9%
885
385
500
1,700
14%
1,250
14.5%
8.9%
10.2%
52.2
62.2
15.7
7.8
-5.7
-13.9
58.3
12.5
11.7
21.5
FY19E
1,283
973
310
7.2%
10.0%
-0.8%
941
661
280
9.6%
15.0%
-1.3%
973
473
500
1,797
6%
1,382
10.6%
8.9%
10.3%
60.3
76.1
17.5
8.5
-4.3
-7.6
62.0
13.0
13.0
21.5
Consolidated E&C Business, incl Hydrocarbons
Order Intake
689
815
- Domestic
536
670
- Overseas
153
145
Order Intake, % YoY
-6.4%
18.3%
- Domestic
-19.9%
25.0%
- Overseas
128.1%
-5.0%
Revenues
465
597
- Domestic
419
467
- Overseas
46
130
Revenues, % YoY
23.4%
28.6%
- Domestic
23.1%
11.4%
- Overseas
26.0%
184.3%
Analyzing Domestic Intake
536
670
Large Projects (INR15b+)
143
145
Base Orders (sub INR15b)
393
525
Consolidated Order Intake
842
1,029
% YoY
22.2%
Consolidated Revenues
642
745
% YoY
15.8%
EBIDTA Margins
E&C, Consolidated
13.1%
11.9%
E&C, Standalone
11.3%
12.1%
Standalone EPS*
44.9
38.3
Consolidated EPS
49.1
51.8
Cons. EPS Composition (INR/share)
Infotech
4.7
6.2
Finance
4.7
5.8
Manufacturing - BTG, Forging,Shipbuilding
-1.1
-3.0
Developmental Business
-2.9
-2.9
E&C / Electrical Products, etc
43.9
45.6
ROE (%) [Standalone]
16.8
14.2
ROE (%) [Consolidated]
17.0
15.3
Wkg. Capital (% of sales) - Adj for Subs Adv
17.0
26.5
* Standalone EPS, excluding dividend received from subsidiary companies
9 January 2017
22

Larsen & Toubro
Financials and Valuations
Income Statement
Y/E March
Net Revenues
Growth Rate (%)
Manufacturing Expenses
Staff Cost
S G &A Expenses
EBITDA
Change (%)
Adj EBIDTA
EBITDA Margin (%)
Depreciation
EBIT
Net Interest
Other Income
Profit before Tax
Tax
Effective Tax Rate (%)
Reported Profit
Less:Addl tax on dividend by Subs
Less: Minority Interest
Add: Profits of Associates
EO Adjustments
Adjusted Profit
Growth (%)
Cons. Profit (Reported)
2012
642,307
23.4
472,185
49,950
33,577
86,885
13.2
86,885
13.5
15,803
71,082
11,019
8,290
68,353
22,826
33.4
46,095
87
348
462
568
45,555
9.0
46,123
2013
744,980
16.0
546,888
62,446
36,359
99,287
14.3
99,287
13.3
16,371
82,917
21,243
10,557
72,231
23,790
32.9
51,808
130
722
384
3,368
47,973
5.3
51,341
2014
851,284
14.3
616,948
80,276
46,517
107,543
8.3
107,543
12.6
14,458
93,085
31,414
9,819
71,490
26,076
36.5
48,817
208
-382
93
3,402
45,680
-4.8
49,083
2015
920,046
8.1
672,937
79,222
54,531
113,356
5.4
113,356
12.3
26,225
87,131
28,507
10,072
68,696
22,836
33.2
49,337
0
1,710
21
3,477
44,171
-3.3
47,648
2016
1,019,641
10.8
724,126
133,250
58,771
103,494
-8.7
103,494
10.2
17,867
85,627
16,405
10,032
79,254
24,308
30.7
55,888
0
3,196
-9,902
942
41,848
-5.3
42,790
(INR Million)
2017E
1,092,044
7.1
784,179
131,792
62,945
113,130
9.3
113,130
10.4
17,758
95,372
19,404
12,834
88,801
27,237
30.7
61,565
0
4,860
-6,519
0
50,185
19.9
50,185
2018E
1,249,995
14.5
885,427
150,854
72,049
141,665
25.2
141,665
11.3
19,388
122,277
33,527
11,200
99,950
30,656
30.7
69,294
0
5,549
-5,564
0
58,181
15.9
58,181
Balance Sheet
Y/E March
Equity Capital
Reserves and Surplus
Net Worth
Debt
Deferred Tax Liability
Minority Interest
Capital Employed
Gross Fixed Assets
Less : Depreciation
Add : Capital WIP
Net Fixed Assets
Investments
Inventory
Sundry Debtors
Cash & Bank
Loans & Advances
Other Current Assets
Current Assets
Current Liabilities
Net Current Assets
Capital Deployed
E: MOSL Estimates
2012
1,225
287,811
289,036
471,501
44,995
17,535
827,898
255,174
61,380
149,127
342,921
87,895
42,299
204,054
35,221
74,922
153,396
757,623
360,755
396,869
827,898
2013
1,231
337,366
338,597
619,936
1,837
26,529
986,899
379,822
75,670
113,068
417,220
87,675
51,874
230,149
35,715
84,536
201,930
924,213
442,209
482,004
986,899
2014
1,854
375,262
377,116
801,529
3,375
31,792
1,213,812
411,347
88,824
143,237
465,760
81,090
55,275
263,846
40,966
134,755
254,934
1,150,574
483,612
666,962
1,213,812
2015E
1,859
407,232
409,091
905,714
-1,847
49,986
1,362,944
454,711
107,331
155,237
502,618
96,121
65,182
300,894
57,562
193,020
246,883
1,335,860
571,655
764,206
1,362,944
2016
1,863
438,054
439,917
1,013,066
-3,918
67,688
1,516,753
562,967
130,152
174,899
607,715
100,800
53,620
359,899
59,016
280,946
289,061
1,558,702
750,465
808,238
1,516,753
(INR Million)
2017E
1,863
475,541
477,404
947,934
-3,918
72,548
1,493,969
577,819
147,910
174,899
604,809
100,800
57,427
370,496
11,740
300,896
309,587
1,592,114
803,754
788,360
1,493,969
2018E
1,863
517,783
519,646
956,225
-3,918
78,097
1,550,050
587,819
167,297
174,899
595,421
100,800
65,733
424,083
32,430
344,416
354,365
1,773,835
920,007
853,828
1,550,050
9 January 2017
23

Larsen & Toubro
Financials and Valuations
Ratios
Y/E March
Basic (INR)
Standalone EPS Adj
Growth (%)
Consolidated EPS Adj
Growth (%)
Con. EPS (Fully Diluted)
Growth (%)
Cash EPS
Book Value
Dividend Per Share
Div. Payout (Incl. Div Tax ) %
Valuation (x)
P/E (Standalone)
P/E (Consolidated)
P/E (Consolidated) (Fully Diluted)
Price / CEPS
EV/EBITDA
EV/ Sales
Price / Book Value
Dividend Yield
Return Ratio (%)
RoE
RoCE
Turnover Ratios
Debtors (Days)
Inventory (Days)
Asset Turnover (x)
Leverage Ratio
Current Ratio (x)
D/E (x)
2012
47.5
22.1
49.1
9.0
49.1
9.0
66.2
311.8
11.1
22.5
2013
49.3
3.7
51.8
5.3
51.8
5.3
69.4
365.3
11.5
22.2
2014
52.9
7.4
49.3
-4.8
49.3
42.8
64.9
406.9
14.2
28.9
2015E
50.2
-5.1
47.2
-4.2
47.2
-4.2
75.2
437.3
13.0
27.5
2016E
47.5
-5.5
44.7
-5.3
44.7
-5.3
63.8
470.2
12.8
28.7
2017E
48.7
2.5
53.6
19.9
53.6
19.9
72.6
510.3
11.7
21.8
2018E
62.3
28.0
62.2
15.9
62.2
15.9
82.9
555.5
14.9
24.0
32.8
28.3
28.3
21.0
19.9
3.0
5.2
0.8
17.0
8.8
31.6
26.9
26.9
20.0
18.9
2.7
4.5
0.8
15.3
8.3
29.4
28.2
28.2
21.4
19.1
2.5
3.8
1.0
12.8
7.2
31.0
29.5
29.5
18.5
19.0
2.4
3.4
0.9
11.2
6.5
32.8
31.1
31.1
21.8
21.8
2.3
3.2
0.9
9.9
6.3
32.0
25.9
25.9
19.2
19.8
2.2
3.0
0.8
10.9
7.5
25.0
22.4
22.4
16.8
15.7
2.0
2.7
1.1
11.7
9.2
116.0
24.0
0.8
2.1
0.9
112.8
25.4
0.8
2.1
1.0
113.1
23.7
0.7
2.4
1.2
119.4
25.9
0.7
2.3
1.2
128.8
19.2
0.7
2.1
1.1
123.8
19.2
0.7
2.0
0.9
123.8
19.2
0.8
1.9
0.8
Cash Flow Statement
Y/E March
PBT before EO Items
Add : Depreciation
Change in diff tax liability
(Inc)/Dec in WC
CF from Operations
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
CF from Investments
(Inc)/Dec in Net Worth
(Inc)/Dec in Debt
Change in Minority Interest
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
E: MOSL Estimates
2012
46,123
15,803
-3,231
-134,620
-75,925
-77,087
-153,012
4,263
-73,037
9,155
143,215
7,275
-11,916
147,729
-1,233
36,455
35,222
2013
52,057
16,371
-43,158
-84,641
-59,372
-90,670
-150,042
220
-90,237
5,057
148,436
8,994
-12,385
150,102
493
35,222
35,715
2014
49,020
14,458
1,538
-179,708
-114,692
-62,998
-177,690
6,585
-56,413
4,821
181,593
5,263
-15,322
176,355
5,251
35,715
40,966
2015E
47,648
26,225
-5,221
-80,647
-11,995
-63,083
-75,078
-15,032
-78,114
-1,571
104,185
18,194
-14,103
106,705
16,596
40,966
57,562
2016E
42,790
17,867
-2,071
-42,578
16,008
-122,965
-106,957
-4,679
-127,644
1,982
107,352
17,702
-13,945
113,090
1,454
57,562
59,017
2017E
50,185
17,758
0
-27,398
40,545
-14,852
25,693
0
-14,852
0
-65,132
4,860
-12,697
-72,969
-47,276
59,017
11,740
(INR Million)
2018E
58,181
19,388
0
-44,779
32,790
-10,000
22,790
0
-10,000
0
8,291
5,549
-15,940
-2,100
20,690
11,740
32,430
9 January 2017
24

Larsen & Toubro
NOTES
9 January 2017
25

Disclosures
This document has been prepared by Motilal Oswal Securities Limited (hereinafter referred to as Most) to provide information about the company (ies) and/sector(s), if any, covered in the report and may be distributed by it and/or its affiliated
company(ies). This report is for personal information of the selected recipient/s and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or inducement to invest in securities
or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your general information and should not
be reproduced or redistributed to any other person in any form. This report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any
advice or recommendation in this material, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income
from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur.
MOSt and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We and our affiliates have investment banking and other business relationships with a some companies covered by our
Research Department. Our research professionals may provide input into our investment banking and other business selection processes. Investors should assume that MOSt and/or its affiliates are seeking or will seek investment banking or other
business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may educate investors on investments in such business . The research professionals
responsible for the preparation of this document may interact with trading desk personnel, sales personnel and other parties for the purpose of gathering, applying and interpreting information. Our research professionals are paid on twin parameters of
performance & profitability of MOSt.
MOSt generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, MOSt generally prohibits
its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals or affiliates may provide oral or written market
commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the
recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing among other things, may give rise to real or potential conflicts of interest. MOSt and its affiliated company(ies), their directors and
employees and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such
securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of
interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s)
are completely independent of the views of the affiliates of MOSt even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
Reports based on technical and derivative analysis center on studying charts company's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a
company's fundamental analysis. In addition MOST has different business segments / Divisions with independent research separated by Chinese walls catering to different set of customers having various objectives, risk profiles, investment horizon,
etc, and therefore may at times have different contrary views on stocks sectors and markets.
Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates or employees from, any and all
responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt or any of its affiliates or employees free and harmless from all losses,
costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The information contained herein is based on publicly available data or other sources believed to be reliable. Any statements
contained in this report attributed to a third party represent MOSt’s interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription service, and such use and interpretation have not been
reviewed by the third party. This Report is not intended to be a complete statement or summary of the securities, markets or developments referred to in the document. While we would endeavor to update the information herein on reasonable basis,
MOSt and/or its affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its affiliates or employees shall not be in
any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. MOSt or any of its affiliates or employees do not provide, at any time, any express or implied
warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own
investigations.
This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary
explanation of its contents.
Most and it’s associates may have managed or co-managed public offering of securities, may have received compensation for investment banking or merchant banking or brokerage services, may have received any compensation for products or
services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months.
Most and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report.
Subject Company may have been a client of Most or its associates during twelve months preceding the date of distribution of the research report
MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise of over 1 % at the end of the month immediately preceding the date of publication of the research in the securities mentioned in this report. To enhance
transparency, MOSt has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report.
Motilal Oswal Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014. SEBI Reg. No. INH000000412
Pending Regulatory inspections against Motilal Oswal Securities Limited:
SEBI pursuant to a complaint from client Shri C.R. Mohanraj alleging unauthorized trading, issued a letter dated 29th April 2014 to MOSL notifying appointment of an Adjudicating Officer as per SEBI regulations to hold inquiry and adjudge violation of
SEBI Regulations; MOSL replied to the Show Cause Notice whereby SEBI granted us an opportunity of Inspection of Documents. Since all the documents requested by us were not covered we have requested to SEBI vide our letter dated June 23,
2015 to provide pending list of documents for inspection.
List of associate companies of Motilal Oswal Securities Limited -Click
here to access detailed report
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the
specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible for preparation of MOSt research receive compensation based upon various factors,
including quality of research, investor client feedback, stock picking, competitive factors and firm revenues
Larsen & Toubro
Disclosure of Interest Statement
Larsen & Toubro
Analyst ownership of the stock
No
Served as an officer, director or employee -
No
A graph of daily closing prices of securities is available at www.nseindia.com and http://economictimes.indiatimes.com/markets/stocks/stock-quotes
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject
MOSt & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant
to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets
(Hong Kong) Private Limited for distribution of research report in Kong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document
relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt
from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a registered
investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption
under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons.
This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be
acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors.
In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to
conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant
to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject to
NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a subsidiary of Motilal
Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in the Financial Advisers Regulations and the
Securities and Futures Act (Chapter 289), as amended from time to time.
In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Varun Kumar
Varun.kumar@motilaloswal.com
Contact : (+65) 68189232/ (+65) 68189233 / 65249115
Office Address:21 (Suite 31),16 Collyer Quay,Singapore 04931
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com
Motilal Oswal Securities Ltd
9 January 2017
26