Detailed Narrative
Larsen & Toubro delivered a robust performance in Q3 FY25, marked by record-breaking order inflows and strong execution across its core segments. The company reported its highest ever quarterly order inflow of ₹1.16 trillion, representing a significant 53% year-on-year growth. This surge was primarily driven by strong ordering momentum in the Infrastructure, Hydrocarbon, CarbonLite Solutions, and Precision Engineering & Systems businesses, with international orders contributing 52% to the Projects & Manufacturing (P&M) portfolio. The total order book expanded by 20% YoY to ₹5.64 trillion as of December 2024, providing healthy revenue visibility for future periods.
Group revenues for the quarter grew by a healthy 17% YoY to ₹647 billion, with the P&M business contributing ₹473 billion, up 20% YoY. Despite this strong top-line growth, consolidated PAT increased by 14% YoY to ₹33.6 billion. The group-level EBITDA margin, excluding other income, stood at 9.7% for Q3 FY25, a slight dip from 10.4% in the prior year, attributed to a revenue mix favoring the P&M segment and lower operating margins in the IT & Technology Services (ITTS) portfolio. However, the P&M portfolio maintained its EBITDA margin at 7.6%, consistent with the previous year.
Strategically, L&T Energy Green Tech secured ₹300 crores in PLI incentives for 90,000 MTPA green hydrogen capacity over three years, signaling commitment to energy transition. LTIMindtree and LTTS reported their highest-ever deal wins, with LTIMindtree securing USD 1.68 billion and LTTS recording 8 large deals. LTTS also completed the acquisition of Intelliswift for USD 110 million to enhance its digital offerings. In financial services, L&T Finance achieved 97% retailization of its loan book, ahead of its Lakshya 2026 targets, and maintained a healthy Return on Assets of 2.27%. The company also entered a strategic partnership with E2E Networks, acquiring a 15% stake for ₹10.79 billion, with an additional 6% expected by May 2025, to bolster its data center and AI cloud solutions.
Management expressed strong confidence in the outlook for FY25, revising its order inflow guidance from 10% growth to "surpassing 10%" and indicating "potential upsides" to the 15% revenue growth guidance, citing a robust pipeline and strong performance in the first nine months. The NWC to revenue ratio guidance was also revised downward from 15% to around 12.7% for March 2025, reflecting improved working capital management. While acknowledging a softer Infrastructure margin in recent years, management anticipates improvement with the execution of new, large orders.
Key concerns raised during the Q&A included the impact of delayed payments on domestic Infrastructure projects, particularly water missions, though a revival is expected from December onwards. Management was evasive on the submarine tender due to NDA constraints. They clarified that the Middle East market remains strong with no significant slowdown in payments or project reprioritization in their core oil & gas, carbon capture, and petrochemical sectors. The company also addressed the group EBITDA margin decline, attributing it to a shift in revenue mix towards lower-margin P&M and reduced operating leverage in the ITTS segment. Overall, L&T's management conveyed a bullish sentiment, underpinned by a strong order book, strategic investments, and a positive outlook for the Indian and GCC economies.