MUMBAI India's industrial group Larsen & Toubro is betting on state spending on infrastructure building to boost growth, a top executive said on Friday.
The conglomerate, viewed as a bellwether for Asia's third-largest economy, said on Friday its quarterly net profit rose nearly a fifth and that it was on track to realise its forecast of 10-15 percent sales growth for the fiscal year ending on March 31.
Larsen, however, cut its new orders forecast to flat growth in the current fiscal year from its October prediction of a 5-7 percent rise, due to sluggish capital spending in the private sector.
Larsen, which has interests in engineering, construction and logistics, has seen slower earnings growth in recent quarters, as its customers in India, its biggest market, keep a lid on fresh investment in the absence of strong demand.
Prime Minister Narendra Modi has been looking to step up government spending on building roads, ports, bullet trains and airports to boost economic growth, which economists say, is critical for spurring private sector investments.
"It's important to note the private sector capex is still very shy. The investment plans are not yet reaching the boardrooms," Larsen's chief financial officer, R. Shankar Raman, told a news conference.
"The growth of the company in terms of fresh orders is largely going to be led by public sector spending, government spending or projects ... which are financed by multi-lateral funding agencies."
Larsen said in a statement consolidated net profit in the three months ended Dec. 31, its fiscal third quarter, rose to 10.35 billion rupees ($152.7 million) from 8.67 billion rupees a year earlier.
Analysts on average had expected the company to post a net profit of 10.80 billion rupees, according to Thomson Reuters data.
Larsen has been expanding in the Middle East, its biggest overseas market, to compensate for the slowdown at home, with overseas markets accounting for 27 percent of its order book in the nine months ended December, compared with 25 percent in the same period of the previous year.
Despite a plunge in oil prices Mumbai-based Larsen sees continued investments on roads, airports and power transmission networks in the Middle East, Deputy Managing Director S.N. Subrahmanyan said.
"The basic projects are continuing to go on and we see a healthy trend in the way it is going on right now," he said.
($1 = 67.8000 rupees)
(Reporting by Sumeet Chatterjee; Editing by Greg Mahlich)
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