Larsen and Toubro Ltd

F:LTO

Earnings Call Analysis

Strong revenue growth and positive order inflow guidance reflect L&T's robust market position.

In Q2 FY '25, L&T reported a 21% year-on-year revenue increase to INR 616 billion, bolstered by strong performance in infrastructure and manufacturing. The order inflow grew by 13%, with an existing order book reaching INR 5 trillion. Consolidated PAT increased by 5% to INR 34 billion, marking a 25% rise excluding nonrecurring gains. L&T maintains its guidance for FY '25 of 10% revenue growth and 8.2%-8.25% EBITDA margins. The Infrastructure segment saw a 30% revenue boost, and international orders constituted 52% of total revenue, indicating a solid global presence.

Robust Financial Performance in Q2 FY '25

In the second quarter of fiscal year 2025, Larsen & Toubro (L&T) reported impressive financial results, driven primarily by a strong execution momentum in various segments, including infrastructure and manufacturing. The group revenues reached INR 616 billion, marking a significant year-on-year growth of 21%. Notably, the Projects & Manufacturing business alone contributed INR 445 billion, rising by 28% compared to the same quarter in the previous year. This boost in revenue reflects the ongoing recovery and growth in the Indian economy, supported by favorable government policies and improved investments from both public and private sectors.

Order Book and Inflows Indicate Future Growth

L&T's order inflows for Q2 FY '25 amounted to INR 800 billion, indicating a sequential growth of 13% but a year-on-year decline of 10%. This decrease in year-on-year figures is largely attributed to the high base effect from the previous year, which included ultra mega orders in the hydrocarbons sector. The company's current order book stands at an impressive INR 5.1 trillion, boosted by a robust prospect pipeline of INR 8.08 trillion for the next six months. This pipeline reveals considerable potential across various sectors, enhancing investor confidence in sustained future revenues.

Impact of Margins on Profitability

The group's EBITDA margin for Q2 FY '25 was reported at 10.3%, slightly lower than the 11% margin observed in the same quarter last year. This variance primarily resulted from a nonrecurring monetization gain in the previous year. Breaking this down further, the Projects & Manufacturing business experienced a marginal increase in EBITDA margin from 7.4% to 7.6%, signifying effective cost management despite the broader economic headwinds. The company maintains a margin guidance for the Projects & Manufacturing segment between 8.2% and 8.25% for the fiscal year, indicating realistic expectations for performance under current granimals.

Earnings Growth Reflects Operational Efficiency

L&T recorded a consolidated profit after tax (PAT) of INR 34 billion for Q2 FY '25, reflecting a 5% growth over the previous year. Excluding nonrecurring items, this represents a 25% increase in PAT, highlighting improved operational levels. Additionally, the returns on equity (ROE) also improved to 16.1%, up 80 basis points year-on-year, further accentuated by a reduction in the net working capital to sales ratio from 16.7% to 12.2%. These figures underscore the company's effective capital management strategies and operational efficiencies.

Segment Performance and Driving Forces

The different segments of L&T have shown remarkable growth. The infrastructure segment alone secured orders worth INR 495 billion, a staggering growth of 77% year-on-year, primarily from renewable energy and heavy civil infrastructure projects. The energy segment, encompassing hydrocarbon projects, reported a 31% increase in revenues, driven by high execution rates of international projects. Although margins faced slight pressures, particularly in hydrocarbons due to varying execution stages, the long-term outlook remains positive with a well-structured order pipeline.

Looking Ahead: Strategic Outlook

Looking forward, L&T anticipates that the economic environment will continue to foster growth. The upcoming quarters are expected to see robust public and private sector capital expenditures, which should enhance order inflow and financial performance. Furthermore, the company remains committed to enhancing its presence in renewable energy, with a growing focus on green hydrogen and ammonia projects. The optimism regarding the pipeline of orders, reinforced by the firm’s strong execution capabilities, positions L&T favorably to navigate both domestic and international markets.

Final Thoughts on Investment Opportunity

In summary, L&T's strong financial performance in Q2 FY '25, supported by impressive order inflows and an improved operational framework, makes it a noteworthy consideration for potential investors. The company’s strategies, coupled with a favorable economic landscape, are likely to yield positive results in the upcoming fiscal years. As L&T continues to push into high-potential areas like renewable energy and maintains a strong focus on infrastructure, it presents valuable growth opportunities for investors seeking stable yet progressive returns.

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Larsen & Toubro Limited Q2 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

Today, we have with us on the call Mr. Subramanian Sarma, Whole Time Director and President of Energy Division; and Mr. P. Ramakrishnan, Head, Investor Relations of Larsen & Toubro Limited.

I now hand the conference over to Mr. P. Ramakrishnan. Thank you, and over to you, sir.

[Parameswaran Ramakrishnan, executive]

Thank you, [ Sagar ]. Good evening, ladies and gentlemen. A very warm welcome to all of you into the Q2 FY '25 earnings call of Larsen & Toubro. The presentation -- the earnings presentation was uploaded on the stock exchange and on our website around 6:35 p.m. just now, maybe one hour back. I hope you have had a chance to have a quick look at the numbers.

As per past practice, instead of going through the entire presentation, I will take you through the important highlights for the quarter, followed by our financial performance summary for the quarter, Q2 FY '25, in the next 25 to 30 minutes. Post that, we will take questions.

Before I start, a brief disclaimer from our end. The presentation that has been uploaded on the stock exchange and our website today, including the discussions that we will have on the call today, may contain certain forward-looking statements concerning the group's business prospects and profitability that are subject to several risks and uncertainties, and actual results could materially differ from those in such forward-looking statements.

I would request you to go through the detailed disclaimer, which is available in Slide 2 of our earnings presentation, that has been uploaded on our back.

The Indian economy has continued to remain resilient, and is expected to maintain a stable growth momentum for the rest of the financial year. This growth is being aided by a prudent policy framework of the Government of India, complemented by a proactive monetary policy management from the Reserve Bank of India.

Besides achieving a healthy trade-off between growth and inflation, the country's fiscal discipline and a well-managed balance of payments converges towards macroeconomic stability. The well-capitalized balance sheets of the banks and the companies further strengthen our hope of sustainable growth in the real GDP in the near to medium term.

With the risk of elections and monsoon behind us, one expects recovery in economic activity in the coming quarters. Further, we expect a healthy public and private CapEx spend to drive economic growth in the second half of this fiscal year FY '25.

Moving on to International. The global macro picture is marked by the geopolitical uncertainty arising out of the conflicts in West Asia and Europe -- eastern Europe. The growing divergence in the growth inflation dynamics across countries has resulted in varying monetary policy responses, where in many developed nations have reduced rates, while some are providing policy stimulus to provide their economies.

Despite all of these skills, it is encouraging to note that the countries in the Middle East, led largely by Saudi Arabia, continuing to focus on investments in oil and gas, infrastructure, industrialization and energy transition projects.

Having covered the macro landscape, let me now share a few important highlights for the quarter. Effective [ 1st ] September 2024, the company has carved out a separate business vertical for renewable energy out of the power transmission and distribution business within its infrastructure segment, primarily to capitalize on the growth opportunities in the renewables segment in a more focused manner. This strategic move comes as the global shift towards clean energy gains momentum, and is driven by the need for decarbonized electricity to combat an all pervasive climate change.

Moving on to carbon-light solutions. I wish to clarify once again that in Q1 FY '25, we had renamed L&T Energy Power to CarbonLite Solutions. We had mentioned that we expect this business to play a major role as an enabler for energy transition by offering low carbon solutions. This will include gas to power, carbon capture and various low-carbon solutions.

We had also mentioned that we were not keen in pursuing EPC opportunities in the thermal power because of the unfavorable contracting terms, whereas we would selectively pursue BTG, that is boiler and turbine generator island opportunities, over time. I hope this clarifies our position with respect to our strategy, with respect to CarbonLite Solutions.

The Heavy Engineering business won a new order on a sole sourcing basis from ITER, which is the International Thermonuclear Experimental Reactor project, for deployment of a critical advanced welding technologies for the world's largest nuclear fusion project at the ITER site in Southern France. The ITER is an engineering [ Maga ] project came that creating energy through nuclear fusion process.

Earlier in calendar 2020, L&T had successfully fabricated and completed the early delivery of the world's largest stainless steel high-rate [ fume ] pressure vessel [indiscernible] for the ITER project. ITER project is a globe-spanning [ globalized ] collaboration comprising of 35 countries.

Coming to the Precision Engineering & Systems business, since its inception in the early '80s, this business has built a portfolio of wide-ranging indigenously designed and develop products, systems, solutions, platforms and technologies for the defense, engineering and aerospace sectors. We believe the government's indigenization efforts will immensely benefit the defense PSUs, including multiple private companies such as us.

While remaining very excited about the opportunities in the near future, we also need to factor the stretch time lines around ordering, as multiple programs need to pass the development test and need government clearances at various levels. We will regularly communicate with investors on the progress made.

With respect to the green energy, the electrolyzer manufacturing business, we have signed a technology license agreement for 4-megawatt electrolyzer design with [ MACE ] on the 18th of September 2024. Previously, this agreement was signed for 0.5 megawatt electrolyte design with MACE in March '23.

Continuing with the electrolyzer factory expansion, the first automated robotic line for stack assembly with a capacity of 150 megawatts has been installed and commissioned successfully at our [ AMI ] engineering complex in Hazira in September '24. As mentioned earlier, we will ramp up the capacity to 500-megawatt in the near to medium term, followed by 1 megawatt -- 1 gigawatt in the medium to long term. The group will actively pursue opportunities in the green energy EPC and target selective participation in green energy development projects as well. We will share the details at an appropriate time.

Coming to real estate development. In our group strategic plan that ends FY '26, we had targeted exit order inflows that is FY '26 order inflows and revenues for the Realty Development business around INR 8,000 crores and INR 5,000 crores, respectively, for the year FY '26.

We are on track to achieve the goals on the revenue side. As far as order inflows are concerned, they are dependent on launching our projects in Mumbai, Bangalore, Chennai and possibly new launches elsewhere.

We remain optimistic on order inflows for the current as well as the next financial year, whereas it will be difficult to comment on the period beyond FY '26, I would like to mention here that we possibly target around 3 to 4x growth on order inflow and revenue from our exit trajectory in FY '26.

Depending on the market conditions, we will pursue growth in residential and commercial through multiple formats. Here again, we will share the details once our plans are finalized with respect to real estate development.

Coming to the semiconductor design, I would say, incubation that we have done. This is done through L&T Semiconductor Technologies Limited, [ LT&CT ] that is currently a wholly owned subsidiary. LT&CT has inaugurated its new development center in Bangalore, [indiscernible] in its journey to innovation and excellence in the Indian semiconductor industry.

During the current quarter, LT&CT completed the acquisition of 100% equity of Silicon Systems Private Limited, a Bengaluru-based semiconductor startup focused on power semiconductors, with a portfolio of more than 30 granted patents and a team of 60 experienced engineers. The acquisition is expected to accelerate LT&CT's product development road map for power semiconductor devices.

LT&CT also signed an MOU with the center for development of advanced computing and [ autonomous ] scientific entity under the Ministry of Electronics and Information Technology, Government of India. The strategic collaboration will aid in generation efforts, with an emphasis on the creation of making India integrated circuit, system on chip circuit and electronic systems design and manufacturing solutions for automotive, industrial and energy applications.

At the current juncture, LT&CT will operate as a fabless semiconductor entity, with a primary focus on nurturing IP and fostering innovation with the Indian semiconductor industry. LT&CT therefore, proposes to operate as an integrated product company, offering a wide range of semiconductor solutions and software products, with a focus on analog, power, mixed-signal, MEMS, radio frequency and VLSI chips catering to automotive industrial products, communication and energy infrastructures in India as well as globally.

Coming to the another expansion to a new business that is data centers, a quick update. Our 2-megawatt data center in [ Pange ] is under integrated testing and is expected to be commissioned in the current quarter, which is October to December '24.

Further, a 12-megawatt data center in Chennai is nearing completion of its testing phase, and is expected to be commissioned shortly. We have plans of scaling up the data center in Chennai to 30 megawatts in the near term.

Besides Chennai, we will also be looking to set up data centers at [ Mape, Navi ], Mumbai and [ Whitefield ] Bangalore in the near to medium term. We are also evaluating multiple other opportunities currently, and we'll share the details once the plans are finalized with respect to this business.

Lastly, Hyderabad Metro achieved the highest ridership ever on a single day of 5.63 lakhs on August 14, 2024.

Now I will start by giving you a summary of the various financial performance parameters for Q2 FY '25. Q2 FY '25 was a quarter of robust performance across all the financial parameters. Our group order inflows for Q2 registered a sequential growth of 13%. On the back of a strong ordering momentum, our order book processed a new milestone of INR 5 trillion.

Aided by a strong execution momentum from several businesses within the core projects and manufacturing portfolio, our group revenues for the quarter registered a growth of 21% on a Y-on-Y basis. Similarly, our margin for the Projects & Manufacturing portfolio also expanded by 20 basis points over the corresponding quarter of the previous financial year.

Our net working capital to revenue at 12.2% as of September '24, this is with respect to the group, improved by 170 basis points on a sequential basis.

Our very strong financial performance this quarter is also supported by robust free cash flows and an improvement in the return on equity as well.

Our return on equity on a trailing 12-month basis as of September '24 is at 16.1%, improving by 140 basis points and 80 basis points on a sequential and Y-o-Y basis, respectively.

Moving on to individual performance parameters. The group order inflows for Q2 FY '25 at INR 800 billion, registered a sequential growth of 13% and a Y-on-Y decline of 10%. The corresponding quarter of the previous year had the benefit of the receipt of some international ultra mega orders in the hydrocarbon business.

Within the group order inflows, our Projects & Manufacturing business secured order inflows of INR 630 billion for Q2, reporting a degrowth of 14% over the corresponding period of the previous year. Just now I mentioned that this is largely because of the high base in the corresponding quarter of the previous financial year.

Our Q2 order inflows in the Projects & Manufacturing portfolio are mainly from infrastructure, hydrocarbon, precision engineering systems as well as heavy engineering. During the current quarter, our share of international orders in the Projects & Manufacturing portfolio is at 62% vis-a-vis 68% in Q2 of last year.

The current quarter, witness orders getting received from multiple segments like renewables, transmission and distribution, roads and runways, urban transit systems, nuclear power, idle and tunnels, minerals and metals, factories, precision engineering systems and as well as offshore vertical of the hydrocarbon business.

Moving on to the prospect pipeline for the near term. We have a total prospect pipeline of INR 8.08 trillion for the remaining -- for the near term, for more so for the 6 months of the current financial year. This corresponds to INR 8.78 trillion at the same time in the last year, representing, I would say, a marginal drop of 8% on a Y-on-Y basis. This decrease is primarily due to a fall in the hydrocarbon and carbon-light prospects pipeline.

The broad breakup of the overall prospects pipeline for the near term, largely for 6 months, is as follows: Infrastructure comprises INR 5.42 trillion vis-a-vis INR 5.06 trillion last year; Hydrocarbons, INR 2.25 trillion current year vis-a-vis INR 2.91 trillion last year; CarbonLite Solutions, INR 0.24 trillion vis-a-vis INR 0.55 trillion last year; Aggregate of Engineering and Precision Engineering & Systems, INR 0.16 trillion vis-a-vis INR 0.23 trillion last year.

Moving on to order book. Our order book is at INR 5.1 trillion as of September '24, which is up 13% vis-a-vis September '23 last year.

As the Projects & Manufacturing business is largely India centric, 60% of the order book is domestic and 40% international. Out of the international order book of INR 2.05 trillion, around 85% is from Middle East and the rest is from other countries across the world. Like I said earlier, the various countries in the Middle East are continuing to focus on investments in oil and gas, infrastructure, industrialization and energy transition.

The breakdown of the domestic order book of INR 3.05 trillion, which I said is 60% of the overall order book, is as follows: the share of central government projects is 14%; state government projects aggregate to 28%; on prospects from PSUs or state-owned enterprise comprise 36%; and the private sector has the remaining share of 22% of the domestic order prospects.

Approximately around 17% of our total order book of INR 5.1 trillion is funded by bilateral and multilateral funding agencies. Again, 90% of this total order book is comprises from infrastructure and energy. You may refer to the presentation slides for further details.

During the H1 FY '25, that is April '24 to September '24, we have [ diluted ] orders of INR 6 billion from the order book. There are no [ dilutions ] from the order book in Q2 FY '25. As of September '24, the share of slow-moving orders is miniscule, which is around 0.5% of the total order book.

Coming to revenues. Our group revenues for Q2 FY '25 at INR 616 billion registered a strong Y-on-Y growth of 21%. International revenues constituted 52% of the revenues during the quarter. The strong execution momentum in infrastructure, hydrocarbon and precision engineering systems within the Projects & Manufacturing portfolio drove the overall group revenues for the quarter.

Within the group revenue, the revenue for P&M business for Q2 FY '25 is INR 445 billion, up by 28% over the corresponding quarter of the previous year.

Moving on to EBITDA margin. Our group level EBITDA margin without other income for Q2 FY '25 is 10.3% vis-a-vis 11% in Q2 of the previous year. This EBITDA margin variance is mainly due to a nonrecurring TOD that is transitory in the development monetization game that happened in Hyderabad Metro in the previous year.

The detailed breakup of the EBITDA margin business-wise, including other income, is given in the annexures to the earnings presentation. You would have noticed that the EBITDA margin in the Projects & Manufacturing business for Q2 FY '25 is at 7.6% vis-a-vis 7.4% in Q2 of the previous year. I will cover the details a little later when I talk about the performance of each of the segments.

Our consolidated PAT for Q2 FY '25 at INR 34 billion is up by 5% over Q2 of the last year. This PAT growth is reflective of improved activity levels, partly offset by lower other income. The drop in other income is a function of lower average treasury investments in the current quarter compared to the corresponding quarter of the previous year. As you may be aware, the drop in average treasury investment is also attributed to the share buyback that was done by the company last year.

Further part of the corresponding quarter of the previous year includes this gain that I was talking about, the TOD monetization in Hyderabad Metro of INR 5.12 billion. Excluding this nonrecurring TOD monetization gain, the consolidated PAT for Q2 FY '25 has registered a growth of 25% over the corresponding quarter of the previous financial year.

The group performance, the P&L construct, along with the reasons for major variances under the respective function edge, is provided in the presentation. You may go through the same for further details.

Coming to net working capital. The net working capital to sales ratio or NWC to sales ratio has improved from 13.9% in June '24 to 12.2% in September '24, mainly led to an improvement in the gross working capital to sales ratio, backed by strong customer collections during the quarter. Further, on a Y-on-Y basis, the NWC to sales has improved from 16.7% in September '23 to 12.2% in September '24.

The group level collections, excluding Financial Services business for Q2 FY '25 is INR 621 billion vis-a-vis INR 463 billion in Q2 FY '24, registering an increase of 34% on a Y-on-Y basis. I would also request you to go through the cash flow statement as part of annexes to the earnings presentation.

The cash flow from operations for Q2 FY '25 at INR 77 billion has more than doubled vis-a-vis INR 35 billion in Q2 FY '24.

Finally, trailing 12 months ROE for Q2 FY '25 is 16.1% vis-a-vis 15.3% in Q2 FY '24, an improvement of 80 basis points. The improved profitability with every passing quarter, along with the return of capital to shareholders in the form of first buyback, is contributing to this improvement.

Very briefly, I will now comment on the performance of each of the business segments before we give our final comments on the outlook.

First, infrastructure. Coming to order inflows, this segment secured orders of INR 495 billion for Q2 FY '25, registering a robust growth of 77% on a Y-on-Y basis.

International orders constituted 63% of the total order inflows. The current order -- the current quarter, we received orders mainly in the transmission and distribution, renewable energy and adequately supported by other business verticals like minerals and metals, buildings and factories, transportation and heavy civil infrastructure.

Our order prospect pipeline in Infrastructure segment for the near term, that is 6 months, is around INR 5.42 trillion vis-a-vis INR 5.06 trillion during the same time last year. This represents an increase of around 7%.

The infra prospects pipeline of INR 5.42 trillion comprises of domestic prospects of INR 4.14 trillion and international prospects of INR 1.28 trillion. The subsegment breakup of the total order prospects in this segment is as follows: water and effluent treatment comprises 17%; power transmission and distribution, 7%; renewables, 8%; transportation infrastructure, 28%; buildings and factories, 15%; civil infrastructure, 18%; and minerals and metals 8%. The order book of this segment at INR 3.43 [ trillion ] as of September '24. The book bill or is that the execution time frame for this order book is around 3 years.

The Q2 revenues for our Infrastructure segment at INR 320 billion registered a strong growth of 30% over the comparable quarter of the previous year, largely aided by a very strong execution progress across multiple jobs from the opening order book.

Our EBITDA margin in this segment for Q2 FY '25 is at 6% vis-a-vis 5.4% in the corresponding quarter of the previous year. The higher margin is primarily explained by improved job progress.

Moving on to the next segment, energy projects that comprises Hydrocarbon and CarbonLite Solutions. The decline in the Q2 order inflow for this segment is mainly due to a high base that I mentioned earlier during the call.

Like I mentioned, the previous year Q2 had the benefit of ultra mega orders in the Middle East in the Hydrocarbon business. We have a strong order prospects pipeline of INR 2.49 trillion for this energy segment for the remaining 6 months, that comprises of Hydrocarbon prospects of INR 2.25 trillion and CarbonLite Solutions prospects of INR 0.24 trillion.

The order book for this energy segment is at INR 1.17 trillion as of September '24, with the Hydrocarbon order at INR 1.13 trillion, and the CarbonLite Solutions business having an order book of INR [ 0.4 ] billion. The Q2 FY '25 revenues for the segment at INR 89 billion registered a healthy growth of 31%, driven mainly by the execution ramp-up of international projects in the Hydrocarbon business. The lower revenues in CarbonLite Solutions are largely reflective of a depleting or a lower order book.

The Energy segment margin in Q2 FY '25 is at 8.8% vis-a-vis 9.5% in Q2 of the previous year. The negative variation hydrocarbon margin in Q2 over the previous year is reflective of the stage of execution for the various jobs, whereas the improvement in the Carbon Solutions project margin is due to a better job mix.

We now move on to Hi-tech Manufacturing segment that comprises Precision Engineering & Systems and the Heavy Engineering business. The receipt of land and marine system orders contributed to the order inflow growth in the Precision Engineering Systems business, whereas Heavy Engineering business benefited from the receipt of a significant nuclear order.

The order book of this segment is at INR 356 billion as of September '24. The order prospects pipeline for the remaining 6 months in this segment is around INR 158 billion. A strong execution momentum continues in the Precision Engineering Systems, whereas Heavy Engineering revenue decline is reflective of jobs in the early stages of execution. The segment margin in the current quarter is impacted by additional cost provisions in certain jobs in the Heavy Engineering business.

Moving on to the Information Technology and Technology Services portfolio, which largely comprises this business -- this segment largely comprises of the 2 listed entities [ L&T Mindtree ] and L&T Technology Services.

The revenues of this segment at INR [ 118 ] billion in Q2 FY '25 registered a modest growth of 6%, which is largely reflective of present market conditions. Despite the ongoing macroeconomic concerns, the deal pipeline for this segment is healthy, with good visibility across all the segments that both the companies cater to.

The segment margin improvement in Q2 vis-a-vis the corresponding quarter of the previous financial year is mainly due to higher ForEx gains and other income. As both the companies in this segment are listed entities, the detailed fact sheets of their performance are already available in the public domain.

We now move on to L&T Finance Limited. Here again, the detailed results are available in the public domain. But very briefly, I would like to cover Q2 reward around very strong retail disbursements, healthy collections and improved profitability.

The balance sheet is strong on the back of in-bid macroprudential buffers. The Financial Services business has achieved 96% retailization of loan book in September '24, well ahead of its [indiscernible] '26 targets. The ROA remained healthy at 2.6% despite the sectoral headwinds.

Like I had mentioned in my previous call as well, this business is building itself on the 5 pillars of growth, namely: enhancing customer acquisition, a sharpening credit underwriting process, implementing futuristic digital architecture, high-end brand visibility and capability building. And finally, adequate capital in the balance sheet is available to pursue growth in the near to medium term.

Moving on to Development Projects segment. This segment includes Nava Power and Hyderabad Metro. Most of the revenues in this segment are contributed by Nava Power. The revenue and margin variance of this segment is explained by the nonrecurring demonetization of INR 5.12 billion in Hyderabad Metro in the quarter of the previous year.

At this juncture, I would like to give you some ridership statistics on the Hyderabad Metro. The average metro readership has improved from 4.32 lakh passengers in a day in Q1 FY '25 to 4.68 lakh passengers per day in Q2 FY '25. The ridership in Q2 FY '24 was 4.62 lakh passengers a day. The metro at a PAT level, we have -- the group has consolidated a loss of INR 2.07 billion in Q2 FY '25 vis-a-vis a profit of INR 2.4 billion in Q2 FY '24.

Moving on to the Other segment. This segment comprises Realty, Industrial Valves, Construction Equipment, Mining Machinery, Rubber Processing or Tire Processing Machinery and the residual portion of the Smart World & Communications business.

The Q2 revenues for this segment grew by 2% over the corresponding quarter of the previous year, mainly contributed by higher handover of residential units in the Realty business, improved performance in Valves business, partly offset by a degrowth in the Construction Equipment and Mining Machinery business, including [indiscernible] of the Rubber Processing Machinery as well.

The sale of a commercial space in Realty and improved overhead recovery in the Valves business drives the segment margin improvement in Q2 over the corresponding quarter of the previous year.

Coming to the last part of my presentation, the outlook for the near term. The Indian economy has remained sanguine despite the ongoing global political turbulence, and is poised for steady growth.

The macroeconomic parameters of inflation and growth are well balanced. The investment activity has remained resilient, with the government CapEx rebounding from a contraction that was observed in the first quarter. Additionally, a new government policy offering employment incentives to workforce and companies could improve the availability of skilled and trained labor.

Better-than-expected southwest monsoon augurs very well for the revival of the rural economy and consumption demand.

With the government's fiscal consolidation efforts, the government debt is projected to decrease. Further, consumer inflation is anticipated to remain range bound on account of an improved agricultural output.

The various high-frequency indicators point towards a healthy growth momentum. The manufacturing activity is also gaining on the back of improving domestic demand, lower inputs costs and a supportive policy environment.

The global economic perspective is one of cautious optimism as the conflicts in Eastern Europe and West Asia are yet to spill over beyond the affected countries. The continuing disruptions in the Red Sea are affecting global trade in terms of higher cost and longer lease time. Amidst all this appeal, the Middle East continues to expand its investment in oil and gas, industrialization and the various energy transition initiatives.

The China Central Bank has unveiled its biggest stimulus since the pandemic to pull the economy out of its deflationary slide and back towards the path of growth.

Lastly, heightened economic and financial market volatility is likely to continue in the short term as the U.S. presidential elections are just around the corner.

L&T is confident that the various structural reforms undertaken by the Indian government in the last 10 years will improve the quality of India's growth, besides setting a strong foundation to propel the realization of a [indiscernible] [ barrel ] by 2047. The company remains committed on pursuing a technology-driven growth, and deliver profitable returns to all its stakeholders on a sustained basis.

Lastly, we continue to maintain our guidance for the current financial year around group order inflows, group revenues, margins in the Projects & Manufacturing portfolio and group net working capital to revenue.

Just to recall, the guidance for order inflow was 10%, for the group revenues was 15%. The margins in and around the same -- for the margins for the P&M portfolio in and around the same level that we had printed for FY '24 and the NWC to revenue target, around 15% as of March '25. Thank you, ladies and gentlemen, for the patient hearing. We can now begin with Q&A.

[Operator]

[Operator Instructions] The first question comes from Mohit Kumar from ICICI Securities.

[Mohit Kumar, analyst]

Congratulations on a very good order inflow in H1 FY '25 despite a very high base. My question, sir, on the first is, how do you think about the domestic prospects? Last year was subdued on account of general elections. The first half order inflow is also flat. So question is, are you seeing the signs of improving activity in substantial terms in H2?

[Parameswaran Ramakrishnan, executive]

Okay. Mohit, I think when we reported the financial results for FY '24 when we gave the guidance for order inflow growth of 10% at the group level, we had actually baked in that the first 6 months as far as the domestic order prospects converted order inflow could be a little subdued, given the fact that the first quarter was elections, followed by the government formation in Q2.

Despite this, I would say, subdued environment, we believe that our numbers of domestic order inflows has been quite, I would say, good, in line with our own expectations for the first 6 months. But definitely, the H2, we believe that given that the conditions for the GDP growth and the overall financial state of affairs for the government and the private sector, I guess we could see a more busier second half with respect to the overall domestic ordering environment is concerned.

As I was talking about against the total order prospects of INR 8.08 trillion, the share of domestic prospects is 57% aggregating to INR 4.6 trillion. So in a way, it actually suggests that as we had assumed in the -- at the start of the year, the second half of the current financial year would tilt more to domestic ordering resumption in the -- at a larger scale.

[Mohit Kumar, analyst]

Understood, sir. My second question is on the EPC tender for thermal power plant. Is it fair to assume that we will not participate in the full EPC tender for thermal power plant? Having said that, EPC has a forte, right? And why we are restricting ourselves to only doing BTG? In fact, even in the NTPC tender is main plant that is, meaning that we have to do the EPC work for the main plant. Can you help us understand?

[Subramanian Sarma, executive]

Okay, this is Sarma here. So we had said earlier that in the overall thermal power plant scenario, EPC business, which includes BTG and balance of plant, we had seen some, well, first thing was that the terms and conditions were not favorable; and two, what we had seen is that there were significant delays in the balance of the plant-related activities, particularly multiple interfaces with various stakeholders.

So a combination of that was really causing some hardship in terms of extended project duration and holdup in bank guarantees and unfavorable cash flows, et cetera, et cetera. All of that was -- I mean, we had decided to withdraw from the whole segment. But then later on, there have been some extensive discussions, and we have been able to negotiate better terms and conditions for the BTG part.

And I think it also fits well into our core capability of manufacturing where we have a very advanced capacity and derisk the overall portfolio because then we are kind of more in control of our own destiny and not -- and less dependent on others. I think all that fits into our overall risk profile. And we believe that with this approach, we should be able to deliver more consistent and better results.

[Mohit Kumar, analyst]

Understood, sir. That's very helpful, sir. My last question, sir, how are you thinking about monetization of the balance, 14 million square feet of land at Hyderabad in medium term? And what is holding us back from the accelerated monetization?

[Parameswaran Ramakrishnan, executive]

So Mohit, I will take that. This is P.R. here. So as we have been talking about in terms of bringing back Hyderabad Metro in track is a combination of 2 items. One is the state government financial support and along with the TOD monetization. Since it is a concession project, each of the TOD monetization that we need to do are subject to prior approvals of the government. So we did 1 particular tranche in the Q2 of the previous year, and we are looking to monetize some of the parcels in the near term.

Hopefully, I think you should get something happening in the next 6 months or so. But it will all be done in tranches and each tranche will be subject to a prior government approval because it is the overall -- the metro concession is a combination of running the metro along with the real estate development. So whenever we get an opportunity, an interested party to buy over a particular land parcel, we will take a government approval and do that.

And we do expect based on the pipeline of discussions and opportunities that are happening now, we do expect some amount of monetization to hopefully gain momentum and get crystallized by the end of this financial year.

[Operator]

The next question comes from Aditya Bhartia from Investec. As there is no response from the line of the current participant, we'll move on to the next question. The next question comes from Atul Tiwari from JPMorgan.

[Atul Tiwari, analyst]

Sir, 1 question again on Hyderabad Metro. So the PAT loss was INR 2.07 billion in this quarter. It looks like that it has trended down versus close to being INR 2.7 billion, INR 2.8 billion per quarter kind of number. So is that -- is there any one-off or it is like a normal decline because of increasing the cash flows due to increasing?

[Parameswaran Ramakrishnan, executive]

So Atul, Q2 of the current financial year is normal operations of Hyderabad Metro, okay? And barring -- of course, the ridership has improved. What I would like to state is Hyderabad Metro today is largely -- the loss is on account of the interest on the loans that we have taken. It is because of a slightly lower interest rate and a slower loan portfolio, the losses is coming down.

Now this is steady-state operations quarter for -- as far as Hyderabad Metro is concerned, but a bit uptick in the passenger traffic. So as that passenger traffic improves, slowly, the extent of the loss should be coming down.

[Atul Tiwari, analyst]

Okay, sir. And sir, now that the execution of the large hydrocarbon projects won last year has started, so is it tracking in line with whatever we expected in terms of margin performance and the speed of execution, et cetera? Asking because there has been a bit of a concern on very large exposure in Middle East and the margins in those projects.

[Subramanian Sarma, executive]

Yes. This is Sarma here again. I think, yes, both those projects, INR 40,000 crores, right? I mean one, I think they are very much on track. In fact, as we speak, we are slightly ahead of schedule at this point in time. And we have made some significant commitments already with respect to cost commitments, I mean, to the -- in terms of supply and construction. So, so far, it looks good, yes.

[Atul Tiwari, analyst]

Best of luck for the future.

[Operator]

The next question comes from Amit Anwani from Prabhudas Lilladher.

[Amit Anwani, analyst]

Yes, yes. Sir, my question is on the hydrocarbon prospect. You highlighted that there has been 80,000, 90,000 reduction now for H2 with hydrocarbon prospects, order intake prospects for H2. Just wanted to broadly understand, has the pace of ordering slowed down or anything which we have now are not considering as a prospective order for H2? Is that the reason for the reduction in hydrocarbon prospects?

[Subramanian Sarma, executive]

No, no. See, the reduction what P.R. was talking about is with respect to last quarter same time. And as he had explained that we had a large contract, I mean, 2 of them, INR 40,000 crores were awarded to us. But as such, in this financial year and first half, we have secured awards based on -- I mean, we are performing as per our budget and it is as per our forecast.

So as such, I do not see any slowdown or any loss of momentum. It is only in comparison to the lumpy big jobs we had last year. And that is the nature of the business. I mean, never know that maybe we'll get similar lumpy large jobs in the second half. So we have a still strong pipeline and we are bidding for some large projects, and we'll have to wait and see how it unfolds in the second half.

[Amit Anwani, analyst]

My second question, sir, on the order prospect overall. So we have seen that the prospects has been quite lumpy last year from international markets. And this year also, there has been substantial orders from international markets. Broadly wanted to understand, and now we have been doing thermal also, BTG, as you highlighted.

So broadly for the domestic market next 18 months, which areas or projects where we are seeing momentum? And are we overall seeing the domestic order intake also picking up strongly in the next 12, 18 months since now the major events are over with respect to elections and many things are behind us? Just wanted to understand the 18, 24 months perspective and major order prospects in domestic market.

[Parameswaran Ramakrishnan, executive]

Okay, so let me take that. Apart from what we spoke about just a while ago on the Carbon Light solutions that the order prospects to the BTG, I think a large part of the prospects pipeline centers on infrastructure. So if you really see, the total Infrastructure order prospects for H2 aggregated to INR 5.42 trillion, out of which the share of domestic was INR 4.13 trillion. Now if I look at the overall composition of this INR 4.13 trillion of domestic order prospects, I would say from our perspective, it is actually a good mix of industrial structures, factories, residential structures, data centers, hospitals insofar as the B&F segment is concerned.

We do see a significant amount of investments happening on the transportation infra, both in rail and also on the road, express elevated corridors. This also is quite substantial. And this also, we believe that we should be getting a decent share provided the prospects get converted into the tendering mode.

Coming to the other aspects of, I would say, besides this segment, there are also certain opportunities coming up in ports, in the airports and also highway-related projects in the country. So I would say that the Infrastructure segment, the composition of order prospects cover most of the segments where L&T is, I would say, one of the leading players.

[Amit Anwani, analyst]

Sure. Sir, lastly, on margins, you said that Projects & Manufacturing margins would stay similar to last year. So now since we have moved 4, 5 months and you have some clarity on the prospects, based on the current order book, are we now sensing improvement in FY '26? And any quantum you would like to broadly highlight on margin front, when the margin improvement can be expected to start?

[Parameswaran Ramakrishnan, executive]

So I would like to mention here that as far as margins, all the guidance is concerned, it is for the specific financial year. So as we have closed H1, I would say at a higher margin clip as compared to the H1 of the previous year, the P&M portfolio margin has improved by 20 basis points. So the year has been good.

And at this juncture, I would like to maintain that the margin guidance that we have given at the start of the financial year with respect to the P&M portfolio at 8.2% to 8.25% still holds good. Let us see how Q3 shapes up before we look at revising. As far as next year is concerned, I guess we will look at next year at a separate time frame, not at this juncture, please.

However, having said this, let me also tell you the order book that we have is a mix of both domestic and international with a good mix of projects across sectors, some high-quality jobs and also some normal commercial-related jobs. So it gives us a good, I would say, as we get into -- as we end FY '25, I think that FY '26 looks to be a good start from an overall margin trajectory perspective. But to put a number to that, I think it's a little premature.

[Operator]

The next question comes from Parikshit Kandpal from HDFC Securities.

[Parikshit Kandpal, analyst]

You earlier in your commentary during the call, you mentioned about getting into development assets in the green power. So if you can elaborate what are you looking at in this segment?

[Subramanian Sarma, executive]

Development projects in green energy. Okay. In the green energy, we have 2 markets: one is the export market and one is the domestic market. Within domestic market, a lot of tenders have come out for green hydrogen as well as green ammonia, refinery sector as well as fertilizer sector, and we will participate on those. And they are all mostly on the development side.

And similarly, on the international also, we are seeing some development and traction in supply of green ammonia and green hydrogen in Korea and Japan and those countries, we are partnering with some of those international players and we'll participate in those tenders. And if we are successful, then we'll have maybe an agreement, offtake agreement against, which then we will consider investing and developing those assets. As far as tender is concerned, that is again, for green hydrogen in Panipak. That is available now as part of this large tendering activity going on. And we will participate as we had done it in the past.

[Parameswaran Ramakrishnan, executive]

Okay. To add to what Mr. Sarma just now spoke about as far as our presence in development projects in this space is concerned, I think we are -- we'll be very clear that we will always work on with those projects where the offtake arrangements are confirmed and for a longer again, so that there is a visibility of return.

[Subramanian Sarma, executive]

Yes. Secured, secured.

[Parikshit Kandpal, analyst]

But will you also be open to looking at solar development assets?

[Subramanian Sarma, executive]

No. Currently, that's not part of our plan, no.

[Parikshit Kandpal, analyst]

Battery storage?

[Subramanian Sarma, executive]

Battery storage is something we are studying now we are exploring and looking at some technologies. And we -- it is under evaluation, I should say. But maybe a bit premature to say anything definitive but it is under consideration. But solar, we have made a decision not to get into development. I think it's too late in the game in my view.

[Parikshit Kandpal, analyst]

And neither into module and battery cell manufacturing on the solar side, even that you know?

[Subramanian Sarma, executive]

No, no, no, that's not in the plan.

[Parikshit Kandpal, analyst]

Okay. Second question is on the increasing share of the export orders on international orders. So P.R., how do we look at the margins? I mean, you said that this year margins you will maintain. But incrementally, in absence of any large ordering on the domestic side until now and the share of international increasing. So do you think the trend -- I mean, the last call, you highlighted that the trend will be like from here on, the margins will keep improving. So how will the trend change?

[Parameswaran Ramakrishnan, executive]

So Parikshit, the international project margins have been maintained in line with the bid conditions that we had secured those projects. But as you may be aware, most of the international projects are largely fixed price jobs. So a timely completion will eventually lead to a better margin realization. Having said this, I think one important thing is it is not only giving us size, it is also giving us recognition across the globe because today, Middle East is just not the only geography where we are getting, I would say, projects both in hydrocarbons and renewables.

We are getting based on our strong performance in the projects that we secured, I think it's giving us good credentials to pursue opportunities outside of Middle East also. But having said this, fixed price contracts, the time of execution, timely execution will obviously ensure better margins in the future as far as the thing is concerned.

As Mr. Sarma pointed out, some of the major hydrocarbon jobs that we secured in the last 12 months or so, the execution has been in line with the expectation. In some cases, we are actually ahead. Hopefully, I think it should lead to an improvement in the margins profile. But to put a number at this juncture, maybe again, premature. But I wish to conclude here that the mix or the 50-50 composition of, I would say, execution between domestic and international also giving in the form of better cash flows and thereby overall improvement in returns is possible.

[Parikshit Kandpal, analyst]

So return-wise, it's fine, but mix-wise, it's dilutive to margins increase in the export mix or international mix will be margin?

[Parameswaran Ramakrishnan, executive]

It depends on the stage of execution. So hydrocarbons, what we are witnessing is all early execution stage projects. So hopefully, in the next year, they will achieve peak execution and in the form of -- we don't recognize margins unless the projects achieve a particular stage. So once they achieve -- once they cross that and if there is on-time execution, you should see some amount of margins improvement to happen.

[Parikshit Kandpal, analyst]

Okay. So on the NWC, I mean, we've seen a very, very strong pickup, I mean, improvement there. So what is driving this? We have been hearing coming from other EPC, much smaller EPC play, they are facing problems in the Jal Jeevan Mission project. The collections have not been up to the mark. So because of that, they have reduced their execution. But overall basis, what is driving the strong collections for you? And have you also faced some issues in the Jal Jeevan Mission project, which is a part of the order book?

[Parameswaran Ramakrishnan, executive]

So Parikshit, let me tell you that when we are giving the working capital, I wish to reiterate that this gain or the favorable movement in net working capital is a combination of a major drop that we are witnessing in gross working capital, further supported by advances, which are shown in current liabilities, advances from new projects.

Yes, there are, in certain sectors, across certain sectors or segments, there are some headwinds in terms of delayed collections because of the financial conditions of the respective customer or state or whatever. But we are mindful of the fact that wherever we are witnessing such and given the fact that we have a very large order book to execute, we are executing in such places only the execution progress is in line with the collections that we are getting.

So we are able to manage this in a better way, given the fact that we have a multi-segment, multi-geography that is within India itself, multi-geography means I'm referring to a combination of both states, central and across states, I think it's possibly enabling to ensure that we don't get -- we don't do execution unless until payments are happening on time.

[Parikshit Kandpal, analyst]

Just the last question, sir, on the real estate business. I mean, now it has become quite sizable, I mean you spoke about INR 8,000 crores of order booking and INR 4,000 crores of revenue. And the media report suggests that you're looking at INR 40,000 crores of order booking over the next 10 years in this business and adding about 50 million to 60 million square feet of land parcels.

So I wanted to know, what kind of margins you typically make in these because this is not going to become a very sizable becoming quite sizable as a part of the business? So how -- what kind of margins typically you are able to record in this segment or embedded margins or if you can give some color on embedded margins on the sales or order bookings?

[Parameswaran Ramakrishnan, executive]

Like for example, okay, let me put it like this, Parikshit, that in the current quarter, which is in the other segment, right? So the real estate business, the realty business had secured a margin of almost 37%, okay? Now is this embedded margin because in this business, we recognize revenue only when the residential unit is handed over, okay? So in quarters, wherever there is a large amount of handing over after receipt of the clearances of the respective municipal jurisdiction, you will find a bump-up in revenue and also bump-up in margins.

But just to conclude, our immediate plan on this particular business is the total -- our total portfolio of almost 84 million square feet, comprising both residential and commercial, we have almost completed 24 million square feet, which means that we had already gone into the P&L of the past. So that leaves maybe around 40 million of residential square feet yet to be monetized or coming as revenue and profits in the near future and a commercial around 20 million square feet.

So broadly speaking, 84 million, you have already done 24 million, okay? That leaves 60 million. And in 60 million, you have residential comprising of 40 million and commercial comprising of 20 million. Commercial would be a combination of lease and outright sale, whereas residential as the model is, it's an outright sale. Now out of this 40 million square feet of residential, under construction that is launched and we are taking bookings would be around 10 million square feet.

And future development, I was talking about various places in a combination of joint development and also our own land parcels is another 30 million square feet. On a commercial, under construction is 10 million and future development is 10 million. Now based on this is the existing, I would say, structure we have. As we finalize the real estate business, how we are going to take it up ahead, we will cover that at an appropriate point of time.

[Parikshit Kandpal, analyst]

Typically, what kind of CapEx you do here on the land annually, right? Because now you need to replace.

[Parameswaran Ramakrishnan, executive]

Okay. the new parcels that we are developing currently, apart from monetizing our own land parcels is largely on joint development route. We are not investing land for residential development at this juncture.

[Operator]

The next question comes from Aditya Bhartia from Investec.

[Aditya Bhartia, analyst]

So if you look at our order inflow guidance, we are looking at almost 20% order inflow growth in H2 while our prospect pipeline is down by almost 10%. So what is really leading to it? Are we anticipating a higher market share? Or are we anticipating a higher chunk of those orders actually getting convert -- those tenders actually getting converted into orders, finalizations happening quicker?

[Parameswaran Ramakrishnan, executive]

So Aditya, okay, let me -- I think since you have asked the question, I need to go with numbers. Last year, FY order -- FY '24, the actual order inflow that the company printed was INR 3 lakh crores consolidated, okay? And if you take a 10% guidance on growth, the FY '25 guidance for total order inflow is INR 3 lakh, 30 crores please. This is in crores, okay?

Now the H1 FY '25 actuals, okay, is almost at INR 1,50,000 crores. Now if I have to go by to meet the guidance of INR 3 lakh 30 and I subtract the IT companies and Financial Services, my core business of Projects & Manufacturing, my run rate, which I need for order inflow is another INR 1,50,000 crores, okay? Now my order prospects is INR 8 trillion or INR 8 lakh crores okay?

Now you know you can derive the win rate that is required, provided all these order prospects come into tendering, I mean, subject to the normal qualifiers. But this particular win rate that you will get is not something very unusually different from what we have printed or we have done in the recent last 2 to 3 years.

[Aditya Bhartia, analyst]

So generally, we've been noticing like 15-odd percent kind of a win rate is kind of slightly higher than that, which is why wondering that are we also anticipating a pickup in market share?

[Parameswaran Ramakrishnan, executive]

It's obviously, the one big thing is that many of the order prospects that we have, there are very large ticket sizes in all the segments, both domestic and international. Obviously, we believe that some of this will get bid out and we stand a good chance of trying to make it. But it is not something, at this juncture, let me tell you that this is something a number with a very, very high lead, I would say, run rate that is required. This is something that we have witnessed in the last 2 years.

[Aditya Bhartia, analyst]

Sure, sure, sir. And sir, my second question is on Power segment. There have been some media articles about us winning some orders from NTPC. So just wanted to kind of know, is that correct? Is that not correct? And while you mentioned that you'll not be undertaking any EPC orders, how serious are we going to be on BTG orders on the power side -- on thermal power side?

[Parameswaran Ramakrishnan, executive]

I think, Aditya, I think this was covered in detail by Mr. Sarma when we talked about some time back at the early part of the call that what's our plan. So we have had -- as the public domain news suggests that we are well placed in some of the bids that has happened on BTG, almost 6,400 megawatts. We are well placed across 3 projects. Let us see how they come into a contracting opportunity in the current year -- current quarter, I would say, Q3. Sarma, would you like to add?

[Subramanian Sarma, executive]

No, I think, yes, you said it. I think we should know within this quarter where we reach on this. As per the tender conditions, this 6.4 gigawatts in 3 locations, the customer will award 2 packages of the bundle to L1 and the other one. Third one could go to the L2 bidder if they are able to successfully conclude negotiations, so we'll have to see. But I think it looks like that we'll have at least 4 gigawatts if everything goes well.

[Operator]

The next question comes from Shrinidhi Karlekar from HSBC.

[Shrinidhi Karlekar, analyst]

Congratulations on a good set of numbers. Sir, very good to see 60 basis point kind of improvement in Infrastructure EBITDA margin. Sir, would you say that underlying margin improvement, if you look at separately the domestic business and international business, are probably far higher and partly getting offset by mix change towards international business?

[Parameswaran Ramakrishnan, executive]

So Shrinidhi, I think I responded to a specific question, I mean, 5 minutes back. So let me tell you that, yes, Infrastructure margins have improved when you compare it quarter-on-quarter. There has been an improvement. The margin trajectory in the Projects & Manufacturing portfolio is a cost -- is a variation of the various projects execution across sectors, across states, across geography.

So based on the construct, we gave the guidance of around 8% to 8.2% to 8.25% for the full year. We are on a positive start, let me tell you, this is our H1 numbers. And we do expect that the H2 also, there are no such perceived headwinds insofar as execution is concerned across the entire projects and across the projects in all the geographies. So hopefully, I think we should be at least meeting the guidance that we have talked about or we have referred to.

[Shrinidhi Karlekar, analyst]

And sir, second related question is when we guided like we'll be around 8.2% kind of margins in the projects business in '25 as well, how should we see this margin in the context of trend margins? Like these 8.2% margins are still below the trend that is possible, considering how business has changed both on the kind of orders that you are winning as well as how the business mix is changing? Or you think they are probably 1% to 2% below trend levels? So some kind of guidance on how one should think about improvement over the next couple of years from where you exit in '25?

[Parameswaran Ramakrishnan, executive]

So let me tell you the projects that L&T has secured across the various segments in the P&M portfolio in the last 2 years, the momentum has to pursue a profitable growth, okay? That has been the underlying objective. Now of course, as the project business, obviously, the risk on execution always is there. And as we speak, we don't see any headwinds or external headwinds in terms of the project getting delayed in the execution.

Now I was mentioning in response to working capital in some sectors. The execution is delayed because payments is not happening. But a large part of the order book is coming under normal execution, both India-based projects and also international projects. And we have not compromised on our, I would say, bidding philosophy in terms of taking margins where we are not compromising on margins. So timely execution, timely completion will enable, obviously, improvement in margins from what they have been bid for.

[Shrinidhi Karlekar, analyst]

And sir, last 1, if I may, is your commentary on both public CapEx sustaining momentum as well as visible improvement on the private CapEx side. But sir, if you look at contrary, we are seeing that a lot of CapEx budgets are getting moderated. Even the central CapEx for key infrastructure ministry is seeing some moderation. And on the private side, both B2C as well as B2B product demand is kind of getting moderated. So in that context, sir, what I wanted to understand is, could you please elaborate what is driving the confidence that you see sustained ordering moment from both private as well as public side?

[Parameswaran Ramakrishnan, executive]

So as far as private sector CapEx is concerned, I guess the opportunities are still quite strong insofar as the entire expanse sector of real estate. When you talk about real estate, I'm talking of health care, I'm talking of data centers, I'm talking of residential, I'm talking of commercial. So we do see significant amount of investments getting lined up as far as the private sector is concerned.

Insofar as core industry is concerned, we do see, like, for example, the minerals and metals, if I have to talk about, which is largely a sector where you have private sector investments. The total order prospects is roughly in the range of INR 45,000-odd crores, INR 45,000 crores to INR 50,000 crores. It's a mix of both domestic and international. So domestic order prospects also is roughly around 50%.

Now this is entirely coming from the minerals and metals industry or investment that have been planned. So I would say that it is -- maybe it could have picked up more better but it's not premature to comment that there is no private sector opportunity that is not -- that is being addressed by Larsen & Toubro, okay? Let me put it that way. So wherever we have the prospects are there, these are all named prospects when we talked about the total prospects pipeline of INR 8.08 trillion, and we hope that many of these projects fructify.

[Shrinidhi Karlekar, analyst]

And on the state CapEx, sir, last one?

[Parameswaran Ramakrishnan, executive]

State level prospects, I would say, has a little, I would say, come down relatively so because we do see some of the states looking to convert some part of the state revenues into other, I would say, subsidies and all of that stuff. To some extent, there is some drop. But I guess, I think our -- let us say, our -- given our structure of order book that we have, we are also going a little selective in terms of pursuing opportunities where we are sure to -- our chances of winning are better and our chances of completing the project and getting paid on time is also better.

[Operator]

Ladies and gentlemen, we would take that as our last question for today. I would now like to hand the conference over to Mr. P. Ramakrishnan for closing comments.

[Parameswaran Ramakrishnan, executive]

So thank you. Thanks, everyone, for attending this call. It was our pleasure to interact with all of you. Good luck, and wishing all of you a very happy Diwali. Thank you.

[Operator]

On behalf of Larsen & Toubro Limited, that concludes this conference. Thank you for joining us, and you may now disconnect.