Larsen & Toubro Limited — Q1 FY26 earnings call

Call held 29 Jul 2025

Management summary

Larsen & Toubro reported a strong Q1 FY26, with group order inflows surging 33% YoY to Rs.945 billion and the order book expanding 25% YoY to Rs.6.13 trillion. Revenues grew 16% YoY to Rs.637 billion, while PAT increased 30% to Rs.36 billion, driven by improved activity levels and efficient treasury management. The company maintained its FY26 guidance for order inflows (10% growth), revenues (15% growth), and Projects & Manufacturing margins (8.3%-8.5%), reflecting confidence in its robust prospects pipeline and execution momentum.

Highlights

  • Group order inflows for Q1 FY26 registered a YoY growth of 33% to Rs.945 billion.

  • Order book as of June '25 stood at Rs.6.13 trillion, a substantial growth of 25% on a YoY basis.

  • Group revenues for Q1 FY26 grew by 16% YoY to Rs.637 billion.

  • Projects and Manufacturing portfolio margins remained stable at 7.6% YoY.

  • Net Working Capital to Revenue improved by 380 basis points YoY to 10.1% as of June '25.

  • Return on Equity (trailing 12-month, June '25) improved by 230 basis points YoY to 17%.

  • Reported PAT for Q1 FY26 was Rs.36 billion, up 30% over Q1 of last year.

  • Prospects pipeline for the remaining nine months of FY26 is Rs.14.8 trillion, a sharp increase of 63% YoY.

What they filed

Q1 FY27: revenue up 7.6%, net profit up 27.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue34,919 34,984 42,329 33,471 35,116 +1%37,903 +8%47,191 +11%36,024 +8%
EBITDA2,952 2,883 3,758 2,391 2,320 −21%3,164 +10%4,691 +25%1,915 −20%
Net profit1,988 2,404 3,509 3,485 -3,591 −281%2,832 +18%3,561 +1%4,455 +28%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Order Inflows

  • Group Order Inflows Growth Order Inflows · FY26 · High confidence 10%
    Our guidance for FY26 remains unchanged. We expect our group order inflows and group revenues to grow at 10% and 15% respectively for FY26.

    — P. Ramakrishnan, Head, Investor Relations

  • Domestic Order Inflow Share (Government vs Private) Order Inflows · current year · Medium confidence Government 75%, Private 25%
    In the near term, if you take a domestic order inflow as X, I think even for the current year, we can expect the share of government, State, Centre, plus Public Sector Corporations to be in the range of 75% and Private to be 25%.

    — P. Ramakrishnan, Head, Investor Relations

Revenue

  • Group Revenues Growth Revenue · FY26 · High confidence 15%
    Our guidance for FY26 remains unchanged. We expect our group order inflows and group revenues to grow at 10% and 15% respectively for FY26.

    — P. Ramakrishnan, Head, Investor Relations

Working Capital

  • Net Working Capital-to-Revenue Working Capital · March ‘26 · High confidence 12%
    Our Net Working Capital-to-Revenue guidance for March ‘26 remains at 12%.

    — P. Ramakrishnan, Head, Investor Relations

Profitability

  • Projects and Manufacturing Portfolio Margin Profitability · FY26 · High confidence 8.3% to 8.5%
    With respect to the margin in the Projects and Manufacturing portfolio, we continue to target the 8.3% to 8.5% range for the full year FY26.

    — P. Ramakrishnan, Head, Investor Relations

Sustainability

  • Water Neutrality Sustainability · by 2035 · High confidence achieve water neutrality
    These initiatives are in line with the Company's long-term sustainability goals of achieving water neutrality by 2035 and carbon neutrality by 2040.

    — P. Ramakrishnan, Head, Investor Relations

  • Carbon Neutrality Sustainability · by 2040 · High confidence achieve carbon neutrality

    — P. Ramakrishnan, Head, Investor Relations

Hyderabad Metro

  • Ridership for PBT Breakeven Hyderabad Metro · Medium confidence 700,000 ridership per day
    Now coming back to overall PBT breakeven I guess this has been also communicated last time that the ridership should be going around 700,000 ridership per day and the debt levels which is today around Rs.12,000-odd crores has to be brought down to Rs.8,000 crores.

    — P. Ramakrishnan, Head, Investor Relations

  • Debt Level for PBT Breakeven Hyderabad Metro · Medium confidence Rs.8,000 crores

    From Rs.12,000-odd crores today

    — P. Ramakrishnan, Head, Investor Relations

3 min read

Detailed narrative

Larsen & Toubro delivered a robust performance in Q1 FY26, signaling a strong start to its 'Strat Plan' FY26. The company reported group order inflows of Rs.945 billion, marking a significant 33% year-on-year growth, primarily driven by the Projects and Manufacturing businesses which secured Rs.766 billion in orders, up 41% YoY. This strong ordering momentum propelled the order book to Rs.6.13 trillion as of June '25, a substantial 25% increase from the previous year. Group revenues for the quarter also saw a healthy 16% YoY growth, reaching Rs.637 billion, with international revenues contributing 52%. The Projects and Manufacturing portfolio maintained stable margins at 7.6%. Net Profit After Tax (PAT) for Q1 FY26 surged 30% YoY to Rs.36 billion, attributed to improved activity levels and efficient treasury management.

Segment-wise, Infrastructure secured Rs.410 billion in orders, with 69% from international markets, and reported revenues of Rs.288 billion, growing 7% YoY. Its EBITDA margin was 5.7%, slightly softer due to cost pressures in some water projects. The Energy Projects segment, comprising Hydrocarbon, CarbonLite Solutions, and Green & Clean Energy, saw robust order inflows of Rs.314 billion, significantly up from Rs.88 billion in Q1 FY25, and revenues grew 47% to Rs.125 billion. The Hi-Tech Manufacturing segment's order book stood at Rs.392 billion, while the IT and Technology Services segment, including LTIMindtree and L&T Technology Services, recorded revenues of Rs.126 billion, a 10% growth. The Development Project segment, primarily Nabha Power and Hyderabad Metro, saw Hyderabad Metro's average fare increase to Rs.43, though ridership slightly declined to 4.17 lakh passengers per day, resulting in a PAT loss of Rs.2.08 billion.

Management highlighted a strong prospects pipeline of Rs.14.8 trillion for the remaining nine months of FY26, a 63% increase YoY, largely led by Infrastructure (Rs.7.97 trillion) and Hydrocarbon (Rs.5.78 trillion). Strategic initiatives included the carving out of Hydrocarbon into offshore and onshore verticals for greater specialization, L&T Energy GreenTech winning a 10-KTPA green hydrogen plant BOO contract for IOCL, and L&T Semiconductor Technologies acquiring a power module business. L&T Finance's consolidated loan book crossed Rs.1 trillion, with retail at 98%, and the company achieved a debut investment-grade rating. The company also issued Rs.5 billion in ESG Bonds, aligning with its goals of water neutrality by 2035 and carbon neutrality by 2040.

Working capital management showed significant improvement, with the NWC-to-sales ratio improving by 380 basis points YoY to 10.1% as of June '25, backed by strong customer collections. Cash flow from operations, excluding Financial Services, was robust at Rs.62 billion, a turnaround from an outflow of Rs.14 billion in Q1 FY25. The trailing 12-month Return on Equity improved by 230 basis points to 17%. The corporate EBITDA for Q1 FY26 was notably higher at Rs.520 crores, primarily due to improved treasury income from efficient funds management.

Looking ahead, management reiterated its unchanged guidance for FY26, expecting group order inflows and revenues to grow at 10% and 15% respectively. The Projects and Manufacturing portfolio margin target remains at 8.3% to 8.5% for the full year, with Q1 margins factored into this outlook. While the NWC-to-Revenue guidance is maintained at 12% for March '26, there's a possibility of an upgrade later in the year. Management also provided insights into the conditions for Hyderabad Metro's PBT breakeven, requiring ridership of 700,000 per day and debt reduction to Rs.8,000 crores. They also noted that domestic order inflows for FY26 are expected to be driven primarily by government and PSU orders, constituting about 75% of the total.

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