Event Participants
Executives
2 P. Ramakrishnan, Subramanian Sarma
Analysts
13 Aditya Bhartia, Amit Anwani, Amit Mahawar, Atul Tiwari, Karthik Kohli, Mohit Kumar, Mohit Pandey, Parikshit Kandpal, Priyankar Biswas, Puneet Gulati, Renu Baid Pugalia, Sumit Kishore, Vinod C
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Group order inflows | ₹1.08 lakh crores | +14% YoY; led by 27% growth in international orders (offshore wind in Europe) and sustained private-sector domestic demand (metals & minerals, buildings & factories) |
| Projects, Products & Manufacturing (PPM) order inflows | ₹86,000 crores | +14% YoY; international order share rose to 55% from 49% YoY |
| Total order book | ₹7.79 lakh crores | +27% YoY; 45% infrastructure & utilities, 28% energy conventional, 19% energy green; 52% international |
| Nine-month prospects pipeline | ~₹15.0 lakh crores | vs ₹14.8 lakh crores a year ago; infra & utilities ₹7.82 lakh crores, energy conventional ₹4.37 lakh crores, energy green ₹2.43 lakh crores, M&P ₹0.46 lakh crores |
| Group revenues | ₹67,900 crores | +7% YoY; subdued as guided for Q1 due to supply chain/logistics constraints in Middle East; international revenues 51% of total |
| PPM revenues | ₹46,200 crores | +2% YoY; reflected execution stage of order book and regional disruptions |
| Group EBITDA margin (excl. other income) | 9.0% | -90 bps YoY (9.9%); lower PPM execution, IT subsidiary forex variation, higher ECL provisions |
| PPM EBITDA margin | 7.0% | -20 bps YoY; lower execution and higher ECL provisioning |
| Group PAT | ₹4,100 crores | +14% YoY; aided by improved services business performance and higher treasury income |
| Other income | ₹2,370 crores | ~75% YoY higher; driven by larger group cash surpluses and yields 150-250 bps above typical market rates |
| Incremental ECL provisions | ~₹250 crores | Q1 spike on receivable aging in water & effluent treatment and select India infra projects; not expected to recur in remaining quarters |
| Net working capital to sales | 4.9% | Improved from 10.1% in June 2025; marginally above 4.1% in March 2026 on expected advance utilization and vendor payments |
| Gross working capital to sales | 51.1% | Improved from 53.9% in March 2026 |
| Group collections (excl. financial services) | ₹65,800 crores | vs ₹60,300 crores in Q1 FY26 |
| Cash flow from operations (excl. financial services) | ₹4,300 crores | Healthy, supported by strong collection momentum across Middle East and India |
| Trailing 12-month ROE | 16.1% | vs 17.0% YoY; ~100 bps drag from one-time Labor Code provision in Q3 FY26; underlying ROE broadly stable |
Geographic & Segment Commentary
Infrastructure & Utilities: Order inflows more than doubled YoY to ₹44,400 crores, including the largest-ever domestic metals sector order and strong residential/buildings & factories wins; private sector accounted for 77% of domestic inflows (vs 52% YoY). Order book at ₹3.51 lakh crores (~29-month execution cycle); Q1 revenue fell 3% YoY on early-stage execution of large projects, and EBITDA margin moderated 40 bps to 5.1% on revenue mix and higher ECL provisions.
Energy Conventional: Order inflows dropped to ₹3,100 crores from ₹31,400 crores YoY on deferment of anticipated awards and a high base (prior-year ultra-mega thermal orders). Order book at ₹2.22 lakh crores (hydrocarbon ₹1.59 lakh crores, carbon light solutions ₹0.62 lakh crores); revenue grew 14% YoY to ₹14,200 crores as ultra-mega carbon-light execution gathered pace; EBITDA margin stable at 7.6% (vs 7.5% YoY).
Energy Green (new segment): Order inflows surged 58% YoY to ₹33,000 crores, driven by two ultra-mega Tennet North Sea HVDC offshore wind awards in Europe taking cumulative offshore wind transmission capacity to ~8 GW. Order book at ₹1.47 lakh crores (solar ₹0.74 lakh crores, offshore wind ₹0.57 lakh crores, onshore wind ₹0.16 lakh crores); Q1 revenue declined 11% YoY to ₹5,600 crores on GCC supply chain disruptions, though margins stayed broadly stable.
Manufacturing & Products (renamed; heavy engineering, precision engineering & systems, EPS, electrolyzers, construction equipment, industrial products): Order book stood at ~₹424 billion as of June 2026, with heavy engineering at ₹87 billion, defence-related electronics at ₹66 billion and construction equipment & industrial products at ₹47 billion; inflows aided by multiple refinery equipment packages. Revenue grew 9% YoY to ₹4,500 crores on strong precision engineering/construction equipment execution; margins lower YoY on sales mix. Prospects pipeline ₹460 billion.
Technology Platforms & Services (LTM, LTS, digital platforms, data centers, semiconductor design, smart world residual): Revenue grew 15% YoY to ₹14,600 crores, led by both LTM and LTS; segment margin declined on salary hikes and forex variation in LTM.
L&T Finance: Robust growth in retail disbursements with improved collection efficiency and asset quality; ROA healthy at 2.48% for Q1 FY27.
Realty (now separate segment): Pre-sales order inflows of ₹1,300 crores, +32% YoY; acquired a 20-acre Gurugram land parcel and launched two MMR projects with ~₹5,000 crores potential GSV. Revenue more than doubled YoY to ₹1,010 crores on higher MMR residential handovers; margins moderated on higher joint-development mix.
Development Projects: Includes Nava Power up to divestment (25 June 2026), Hyderabad Metro up to 30 April 2026 (₹38 crore loss in April), and the green energy development business (green hydrogen/ammonia/methanol) in investment/scale-up phase.
Geographic mix: International order inflows grew 27% YoY to 55% of PPM inflows; total order book is 52% international, with Middle East at 71% of the international book and Europe at 14% (offshore wind). Domestic order book (excl. realty) stood at ₹3.54 lakh crores with private-sector share up to 40% from 27% YoY, while central/state government share fell to 30% and PSU exposure to 30%.
Company-Specific & Strategic Commentary
- Offshore wind scale-up: Cumulative ~8 GW of offshore wind transmission capacity secured over three quarters under Tennet's North Sea HVDC program (framework covers up to 12 GW); execution spans 4-5 years with major fabrication at Kattupalli (Chennai), and margins guided to be better than core Middle East EPC.
- Concessions portfolio exit: Nava Power divestment completed 25 June 2026 (marginal gain; ₹110 crores tax outflow); Hyderabad Metro stake sale to Hydra Metro Rail Limited (Telangana SOE) targeted for completion by 30 September 2026.
- Defence & technology partnerships: Strategic collaboration with Exail (France) for unmanned mine countermeasure vessels for the Indian Navy's MCMV program; L&T Vuma partnered with Photonics Inc. for sovereign secure SaaS offerings; EPS business tied up with EVR Motors for next-gen EV traction motors under Make in India.
- Portfolio realignment under Lakshya 2031: Effective 1 April 2026, segments reclassified into Infrastructure & Utilities, Energy Conventional, Energy Green (new), Manufacturing & Products, Technology Platforms & Services, Realty (separate), and Development Projects to sharpen strategic focus and capital allocation.
- Credit strength: Moody's assigned Baa1 long-term issuer rating with stable outlook, two notches above India's sovereign rating.
- Working capital & treasury: NWC-to-sales improved to 4.9% from 10.1% a year ago; collections up ~₹5,500 crores YoY, underpinning higher treasury income.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Order inflow growth (FY27) | 10-12% YoY | Maintained despite Q1 deferments; ₹15.0 lakh crores prospects pipeline for remaining nine months; awards expected to pick up from Q2; no project cancellations seen in India or Middle East |
| Revenue growth (FY27) | 10-12% YoY | Maintained but conditional; H1/Q1 subdued due to Middle East conflict; management will reassess full-year outlook once greater clarity emerges |
| PPM EBITDA margin (FY27) | ~7.8% | Consistent with revenue guidance; assumes no material un-reimbursed cost escalation; client pass-through discussions ongoing |
| Net working capital to sales (FY27) | ~10% | Maintained; reflects expected utilization of customer advances and higher vendor payments as execution accelerates in H2 |
Risks & Constraints
| Risk | Context |
|---|---|
| Middle East conflict / Strait of Hormuz disruption | Supply-chain and logistics constraints affected solar and select GCC projects in Q1; hydrocarbon mega packages have ~3 quarters of buffer before first dispatches from Oman (Q1 CY2027), beyond which prolonged conflict could materially hit schedules and costs. Management is pursuing alternate routes and client compensation month-by-month. |
| Cost escalation and client pass-through | ~50% of the order book is fixed-price. Management states L&T will not incur un-reimbursed costs and is contractually entitled to compensation for time/cost overstay; however, if clients do not agree, project timelines extend and near-term revenue/margin guidance faces pressure. |
| ECL provisions / water business collections | Q1 provisions spiked by ~₹250 crores on aging receivables in water & effluent treatment and select India infra projects. JJ Mission outlays have revived but take time to translate into execution; management expects normalization and some reversals in H2. |
| Order award deferrals | Energy Conventional and certain Middle East awards slipped from Q1, amplified by a high base; management expects closures from Q2, but further slippage of prospects beyond FY27 remains possible. |
| Revenue execution pace | Q1 group growth of 7% reflects early-stage execution on large orders and longer durations (4-5 years) for ultra-mega hydrocarbon and offshore wind projects; H1 revenue is expected to remain subdued. |
| Macro & inflationary pressures | Global growth moderating (US slowdown, China weakness, European inflation), Indian CPI firmed to 4.4% in June 2026, and energy/currency volatility could raise input costs and margin risk. |
Q&A Highlights
Middle East: Cost Impact & Awards
Question: What was the Q1 revenue impact from the Middle East conflict, and will provisions be needed for cost escalations if it persists? (Mohit Kumar, ICICI Securities)
Answer: Only select sectors/sites slowed; hydrocarbon execution largely continued as Qatar projects are at early stage with fabrication in Oman. If the conflict persists, implications could follow, but clients are appreciative and likely to compensate time/cost extensions. No project cancellations seen; Middle East awards expected to pick up from Q2 (P. Ramakrishnan; Subramanian Sarma).
Question: When do hydrocarbon supply milestones hit, and could renewable project margins be materially eroded by supply disruptions? (Renu Baid Pugalia, IIFL Capital)
Answer: Mega offshore packages are scheduled for dispatch from the Oman yard around Q1 calendar year 2027, leaving ~3 quarters of buffer. For onshore/solar, material is brought in only where clients agree to reimburse additional logistics costs; otherwise activity is deferred. Material margin erosion is unlikely (Subramanian Sarma).
ECL Provisions & Asset Quality
Question: How do we reconcile robust collections and working capital improvement with higher ECL provisions? (Mohit Pandey, Citi)
Answer: ECL provisions follow receivable aging; legacy water & effluent treatment projects nearing completion in India drove a Q1 bump of ~₹250 crores. This should not recur in the remaining three quarters, with reversals expected as execution and collections revive (P. Ramakrishnan).
Question: Can you quantify the Hyderabad Metro loss and incremental ECL, and what conventional orders were deferred? (Puneet Gulati, HSBC)
Answer: Hyderabad Metro posted a ₹38 crore loss for April; incremental ECL was ~₹250 crores. Deferred conventional awards (domestic and international) expected in Q1 should come in subsequent quarters; L&T is well placed (P. Ramakrishnan).
Cost Pass-Through & Margin Protection
- Question: How does the accounting work for cost escalations, and can client negotiations upset the 7.8% PM margin guidance? (Aditya Bhartia, Investec; Parikshit Kandpal, HDFC Securities)
- Answer: L&T incurs escalation costs only after formal client agreement to reimburse; otherwise procurement is deferred. Percentage-of-completion captures future costs at current purchase-order prices. ~50% of the order book is fixed-price, but 70-80% of hydrocarbon projects are still in engineering/procurement and unaffected. L&T is entitled to compensation for time/cost overstay and expects no margin erosion (P. Ramakrishnan; Subramanian Sarma).
Treasury Income & Cash Deployment
- Question: Is the ₹2,370 crores other income (+75% YoY) the new recurring level? (Sumit Kishore, Access Capital)
- Answer: It reflects higher group cash balances and yields 1.5-2.5% above typical market rates - a reasonable assumption for the next 1-2 quarters. Lakshya 2031 investments (green energy, data centers) will absorb cash over time. ~70% of treasury income sits in L&T standalone (outside PPM EBITDA), ~20% in listed entities, and the balance within PPM margins. Lakshya capex quantum to be finalized in Q2 (P. Ramakrishnan).
Offshore Wind & Europe Strategy
- Question: What is the broader offshore wind HVDC pipeline, and does the Tennet model give L&T a structural edge? (Karthik Kohli, Kotak Institutional Equities; Amit Mahawar, UBS)
- Answer: The Tennet framework covers up to 12 GW; 8 GW is now secured, worth roughly ₹57,000-60,000 crores of order book executed over 4-5 years. Fabrication is largely at Kattupalli (Chennai), with European hook-up/commissioning through local subcontractors. L&T is qualified on its own and will partner with Hitachi or Siemens case-by-case; EPC geography remains India/Middle East/CIS plus offshore wind globally (Subramanian Sarma).
Guidance, Pipeline & Bidding Discipline
Question: The prospects pipeline is nearly flat YoY - what conversion does the 10-12% guidance assume, and is the order book near a peak? (Vinod C, PhillipCapital)
Answer: The ₹15.0 lakh crores pipeline covers only addressable bids at current pricing; guidance is realistic, not aggressive. With nearly three years of backlog and strict bid discipline on margins and working capital, L&T has no need to chase orders. Optimal backlog is evaluated dynamically per segment (P. Ramakrishnan; Subramanian Sarma).
Question: Are media-reported mega awards (multi-billion dollar and ~$1 billion oil & gas) booked in Q1? (Priyankar Biswas, JM Financial)
Answer: They are part of the remaining nine-month prospects pipeline, not Q1 bookings. Domestic prospects are ₹7.45 lakh crores with ~45% private-sector share (P. Ramakrishnan).
Defence Programs
- Question: Any update on the MC25 RFP and remotely piloted aircraft bidding with General Atomics? (Atul Tiwari, JP Morgan)
- Answer: No incremental update beyond the May call; bidding processes are ongoing (P. Ramakrishnan).
Key Takeaway
Larsen & Toubro reported resilient Q1 FY27 results despite Middle East disruptions: order inflows grew 14% YoY to ₹1.08 lakh crores (international share 55%), lifting order book 27% to ₹7.79 lakh crores; group revenue rose 7% to ₹67,900 crores and PAT 14% to ₹4,100 crores on higher treasury income. Group EBITDA margin fell 90 bps to 9.0% on lower PPM execution, IT forex and ~₹250 crores of incremental ECL provisions, but NWC-to-sales improved to 4.9% and operating cash flow was healthy at ₹4,300 crores. Strategically, L&T secured two Tennet HVDC awards taking cumulative offshore wind capacity to ~8 GW, completed the Nava Power divestment, and targets Hyderabad Metro exit by 30 September 2026. Management maintained FY27 guidance of 10-12% order inflow/revenue growth, ~7.8% PPM margin and ~10% working capital, pending clarity on the Strait of Hormuz conflict; with roughly three quarters of hydrocarbon dispatch buffer, client cost pass-through and conflict duration are the key watch points.