InvestorQ : Why is promoter holding of Larson and tubro so low considering the strong fundamentals of the company. Is it a good company for long term investing?
Rohit Kashyap made post

Why is promoter holding of Larson and tubro so low considering the strong fundamentals of the company. Is it a good company for long term investing?

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Priyanka N answered.
2 years ago
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There are two parts to your question. The first part is about why the promoter holding is so low? Please remember that Larsen & Toubro is not a typical promoter driven company like companies coming from the stable of big industrial groups like Tatas, Birlas, Mahindra and Ambani. The company, L&T, was founded by two Danish engineers whose name the company still bears. The idea was to bring high end engineering and construction services to India. That is the tradition that L&T has continued till date. Over the years, large institutions like LIC, UTI, domestic mutual funds, and foreign portfolio investors have all emerged as the major investors in the company. The senior management over the years like Mr. Kulkarni, Mr. Naik, Mr. Deosthalee and even the current CEO are all professions with no link to any promoter family. There is really no concept of promoter holding in L&T.

The second part of your query is whether the stock is a good buy. I can put down some facts for you and you can take a call based on that.

· It is the largest and most profitable engineering and construction company in India and at any point of time has an executable order book position of Rs.2.50 trillion ($35 billion).

· The company has been a consistently profit making company with consistent growth in top line and bottom line over the years.

· Valuations were a concern on the stock at one point of time but with sharp correction post 2012, the stock is available at reasonable valuations now.

· The company has a strong global franchise and nearly 25% of its business comes from its international contracts. L&T is a very significant player in the oil infrastructure business and has been doing well despite the oil investments being relatively lower now.

· L&T has a significant exposure to the defence business and when the defence in-sourcing actually happens, L&T could be a big beneficiary.

It is hard to take a short term call on this stock but if you are a long term investor then L&T must be there in your portfolio.

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