Thursday August 20, 06:10 PM

L&T not concerned by cut in rating outlook

MUMBAI (Reuters) - Engineering and construction firm Larsen & Toubro (LT.NS : 1589.45 -41.65) said on Thursday it was not concerned by a downgrading of its rating outlook, and expects cashflow to improve as more projects become operational.

Moody's Investor Services cut its outlook on Larsen's Baa2 rating to negative from stable, citing an increase in consolidated debt. The downgrade pushed its shares into negative territory after they had been up 2.5 percent.

"The debt has gone up because we are developing so many infrastructure projects," Chief Financial Officer Y. M. Deosthalee told television channel NDTV Profit.

"All the SPVs (special purpose vehicles) in the infrastructure sector haven't started generating cash yet. As and when they start generating cash, the situation will improve."

Larsen had consolidated debt of 65 billion rupees ($1.3 billion) at the end of June quarter, and held cash reserves of about $1 billion, officials had said when its quarterly results were released last month.

Its engineering and construction business reported operating margins of about 12 percent for the quarter.

"On a standalone basis, we hardly have any debt. There is no issue or cause for concern. This is a very conscious strategy," Deosthalee said.

The company has ridden a construction boom in the past few years as India revamps its airports, roads and adds industrial capacity, and currently has orders worth $17.1 billion on its books.

The global financial crisis and the resulting economic slowdown has put pressure on fresh order flow, which fell by a fifth in the June quarter.

Larsen shares ended nearly flat at 1,482.20 rupees in a Mumbai market that rose 1.4 percent.