homebusiness NewsPrice escalation clause helping L&T dodge rising input costs; sees 10 12% impact of crude hike
Price escalation clause helping L&T dodge rising input costs; sees 10-12% impact of crude hike
In an interview with CNBC-TV18, DK Sen, Whole-time Director and Senior Executive Vice-President - Head Development Projects at Larsen & Toubro, said that the Russia-Ukraine war has not had any significant impact on company’s operations. He mentioned that price escalation clause in almost 80 percent of the company's orders has helped it in circumventing the soaring input costs. However, Sen shared that some of the projects have faced an impact of 10-12 percent on account of oil.
In an interview with CNBC-TV18, DK Sen, Whole-time Director and Senior Executive Vice-President - Head Development Projects at Larsen & Toubro, said that the Russia-Ukraine war has not had any significant impact on the company’s operations so far even though 30 percent of its order book comprises of international orders.
Sen said, "The Ukraine and Russia war had, obviously an effect, as we can see, but roughly about 30 percent of our order book, order sales come from overseas and I don't see any impact as of today in the progress of this work. Obviously, in domestic, there are impacts in terms of the price increases. But in international, I don't see much of an impact as of today. But if it goes on for too long, I am sure there will be some impact."
Sen highlighted that the company has been able to dodge the soaring input costs. He explained that 80 percent of the orders entered by the company have a price escalation clause which have safeguarded the company from the rising costs. Also, a large part of the company's orders come from the government which has seen little impact, he mentioned.
"In domestic businesses - like construction, we use cement, steel, oil, copper, aluminium, all these have gone up. So I see that there is supposed to be an impact, but roughly about 80 percent of our jobs are having pricing clauses . So generally, as of today, we are really circumventing the impact," he mentioned.
Sen shared that the impact of oil on linear projects is 10-12 percent.
He said, "The impact of oil is roughly about 10 to 12 percent. There will be an increase in that. But we have a way to address this because of a formula to actually cover the whole increase in commodities."
Watch the video for the full interview.
First Published: Mar 30, 2022 11:37 AM IST
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