Detailed Narrative
Larsen & Toubro delivered a robust performance in Q2 and H1 FY26, showcasing strong growth across key financial metrics. The group reported revenues of Rs 680 billion in Q2 FY26, marking a 10% Y-on-Y increase, with international revenues contributing 56%. Consolidated PAT for the quarter stood at Rs 39 billion, up 16% Y-on-Y. The Projects & Manufacturing (P&M) portfolio saw its EBITDA margin improve from 7.6% in Q2 FY25 to 7.8% in Q2 FY26. Capital efficiency also improved, with the Net Working Capital to Revenue ratio at a healthy 10.2% and Return on Equity rising to 17.2%.
Order inflows were a significant highlight, with group order inflows reaching Rs 1,158 billion in Q2 FY26, a 45% Y-on-Y growth. The P&M portfolio contributed Rs 968 billion, up 54% Y-on-Y, driven by strong domestic (up 40%) and international (up 62%) inflows. The order book expanded to Rs 6.67 trillion as of September 2025, reflecting a 31% Y-on-Y increase and providing over three years of revenue visibility. The prospects pipeline remains strong at Rs 10.4 trillion, indicating continued growth opportunities, particularly in Infrastructure and Hydrocarbons.
Segment-wise, Infrastructure order inflow grew 6% Y-on-Y, but revenue marginally declined by 1% due to extended monsoon and slower progress in rural water supply projects, though its EBITDA margin improved to 6.3%. Energy Projects witnessed robust order inflows of Rs 382 billion, a significant jump from Rs 78 billion in the prior year, with revenues growing 48%. However, the segment's margin declined to 7.3% due to cost overruns in some legacy domestic and international projects, which management expects to conclude in the coming quarters. Hi-Tech Manufacturing and IT & Technology Services also reported strong revenue growth of 33% and 13% respectively.
Strategically, L&T is expanding its footprint in Renewables, Green Energy, Defense, and Semiconductors through MOUs and acquisitions, including a 300 KTPA green ammonia project with ITOCHU and acquiring power module design assets from Fujitsu General Electronics. The company also confirmed an in-principle understanding for the divestment of its Hyderabad Metro SPV by the end of FY26, with a realizable value of Rs 20 billion, which will eliminate future recourse and parent guarantees on the project's Rs 130 billion debt. Management expressed high confidence in exceeding the full-year FY26 group order inflow guidance of 10% and maintaining revenue growth at 15% and P&M EBITDA margin at 8.5%.
While management acknowledged challenges such as payment delays in water projects and cost overruns in legacy Hydrocarbon projects, they emphasized that these issues are factored into their guidance and that robust risk mitigation strategies are in place. The outlook for the Middle East remains bullish, with L&T holding L1 positions on bids worth approximately $4.5 billion in Kuwait. The company is also actively expanding its thermal power capacity, targeting an additional 10-15 GW in the next 2-3 years, and sees significant opportunities in the KSA renewables market.