LARSEN AND TOUBRO ANALYSIS

L&T as an infrastructure-general company has grown very well over the years.
The growth as well as diversification has led to its very well financial
performance. It has a healthy debt to equity ratio and can take up more debt to
finance the faster growth in current positive economic environment. Furthermore
as per the Scenario summary and Monte Carlo simulation result, the probability
of loss is lowest and its almost 0, so the firm should go for investing in the
project as per these two methods. The scenario analysis also shows a positive
NPV during good, normal as well as bad scenarios hence the project can be
undertaken.
NPV is materially sensitive to mainly CAGR and inflation rate. It is evident when
the sensitivity analysis is done of CAGR and inflation rate on NPV. It is observed
that as inflation is varied from 1% to around 10-11% and CAGR is varied from 2%
to 32%, then NPV varies from as low as 12132 to as high as 124569. NPV is thus
sensitive to CAGR and inflation rate in above mentioned manner.
The cash cycle has been negative for previous years which is excellent, however
it has become positive for the projected years still its less than 1 which is a good
sign. Shorter the cash cycle, the better it is, as ii shows how much of a companys
cash flow is tied up during each transaction. So, cash cycle does not need any urgent
revision. Same is the case with operating cycle which is decreasing considerably
for the projected years.
The DOL is just below 1 and it needs to be increased for a better operating
leverage. The
DFL fluctuates around 1 and at least 2 is desirable for a healthy financial
leverage. The combined leverage is around 1 which is not a good sign for the
company.