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.