Sizeable ordering from key domestic segments —water, hydrocarbon and metallurgical and material handling — have proved to be a “saving grace” for L&T in the year ended March 2018, analysts at Kotak Institutional Equities (KIE) observe, while continuous flow of large orders have supported the overall inflows during the year.

Analysts expect 11-12% ordering CAGR over FY18-21 driven by announced large central government schemes and uptick in private sector ordering from low base in FY18. Last week, R Shankar Raman, chief financial officer, L&T, told a news channel that the company is optimistic about financial year 2018-2019, however, it was too early to say that it is bullish.

Given that FY19 would precede general elections in India which are expected sometime in th enext calendar year, Raman said he was unsure if the volume growth of orders in the current financial year will be “dramatically” higher over FY18. However, important and marquee projects which would be worth mentioning in terms of government achievements would get ordered out, he said.

To be sure, L&T, in November, had cut its order inflow guidance for the full year ended March 2018, and expected to close the financial year with only a nominal increase over last year’s numbers. The company had revised the guidance in light of challenging ordering environment and procedural delays prolonging the project award momentum. It had guided a growth of 12%-14% over last year’s order inflows in the beginning of the year. It closed the financial year 2016-2017 with an order inflow worth Rs 1.43 lakh crore.

Slow pace of growth and high leverage has made private sector shy away from investments for the last few years now. This has led to a material reduction in the share of private sector orders to sub-20% level in year-to-date FY18 (according to orders announced until March 26, 2018) compared to 30-70% share reported over 2008-2016, analysts at KIE observe.

“The decline in private sector spending is also a function of over investment in the FY2008-12 time-frame and low demand off-take over the past several years.”

While private capex has not kept pace, limited ordering from L&T’s clients in the Middle East have also hurt the order inflows momentum. The region, which is still struggling from low oil prices, has reduced the share of overseas orders for L&T to 20% levels in YTD FY18, as compared to 30-45% levels reported over FY2014-17.

“However, recent uptick in oil and commodity prices seen over the past few months may finally restart the investment cycle in these regions,” analysts noted.

Indeed, there has been some respite in the quarter ended December 2017, as fresh orders surged 38% year-on-year to `48,130 crore, though still largely driven by domestic orders. The L&T management, however, stopped short of changing its November guidance. The order uptick was on account of some large orders getting materialised during the three months of October-December 2017.