Larsen & Toubro Limited — Q3 FY25 earnings call

Call held 30 Jan 2025

Management summary

Larsen & Toubro reported a robust Q3 FY25, achieving its highest ever quarterly order inflow of ₹1.16 trillion, driven by strong momentum in Infrastructure and Energy segments. The company's order book grew 20% YoY to ₹5.64 trillion, supporting a 17% increase in group revenues. Despite a slight dip in group EBITDA margin due to revenue mix and ITTS segment performance, PAT grew 14%, aided by improved treasury operations and efficient working capital management. Management expressed confidence in exceeding full-year order inflow and revenue guidance.

Highlights

  • Highest ever order inflow in history for Q3 FY25 at ₹1.16 trillion, a 53% YoY growth.

  • Order book stood at ₹5.64 trillion as of December 2024, marking a 20% YoY increase.

  • Group revenues for Q3 FY25 grew by 17% YoY to ₹647 billion.

  • Consolidated PAT for Q3 FY25 increased by 14% YoY to ₹33.6 billion.

  • Projects & Manufacturing (P&M) portfolio EBITDA margin was maintained at 7.6% for Q3 FY25.

  • Net Working Capital to sales ratio improved significantly to 12.7% as of December 2024 from 16.6% in December 2023.

  • Trailing 12-month Return on Equity improved by 90 basis points YoY to 16.1% for Q3 FY25.

  • L&T Energy Green Tech secured ₹300 crores in PLI incentives for 90,000 MTPA green hydrogen capacity over three years.

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

  • Order Inflow Growth Order Inflows · FY '25 · High confidence surpassing the 10%

    Previously 10% → surpassing the 10%

    First, order inflows. You would recall that we had given a guidance of 10% growth in order inflows for the year. For 9 months FY '25, our order inflows at Rs 2,670 billion is up by 16% over the corresponding period of the previous year. And looking at a strong prospects pipeline of INR5.51 trillion for Q4, we believe that we would be surpassing the 10% guidance on order inflows for FY '25.

    — P. Ramakrishnan, Head Investor Relations

  • Projects & Manufacturing Order Inflows Order Inflows · Q4 FY '25 · High confidence almost Rs 500 billion
    As we speak, we seem to be well placed in orders in the Projects & Manufacturing segment of almost Rs 500 billion.

    — P. Ramakrishnan, Head Investor Relations

Revenue

  • Revenue Growth Revenue · FY '25 · High confidence potential upsides to the revenue guidance of 15%

    Previously 15% → potential upsides to the revenue guidance of 15%

    Coming to revenues, we had guided for a 15% growth in revenues for FY '25. Since our group revenues for 9 months FY '25 has reported a growth of 18% and our order book remains strong, we do believe that there are potential upsides to the revenue guidance of 15% for the full year FY '25.

    — P. Ramakrishnan, Head Investor Relations

Margin

  • Projects & Manufacturing EBITDA Margin Margin · FY '25 · High confidence 8.2%
    Moving on to the EBITDA margin. Our guidance on EBITDA margin for the Projects & Manufacturing remains -- businesses remained at 8.2% that we guided at the start of the financial year. This 8.2% is for the full year FY '25.

    — P. Ramakrishnan, Head Investor Relations

Working Capital

  • Net Working Capital to Revenue Ratio Working Capital · March '25 · High confidence around the same levels that we have printed for as of December '24

    Previously 15% → around the same levels that we have printed for as of December '24

    On Net Working Capital, we had earlier guided the NWC to revenue of 15% in March '25. Since our NWC to revenue is at 12.7% as of December, we believe that our NWC to revenue should be around the same levels that we have printed for as of December '24.

    — P. Ramakrishnan, Head Investor Relations

Credit Cost

  • Credit Cost Peak Credit Cost · Q4 FY '25 · Medium confidence peak in Q4 FY '25
    The company expects credit cost in rural group and the micro finance loans to peak in Q4 FY '25 and some normalization from Q1 FY '26 onwards.

    — P. Ramakrishnan, Head Investor Relations

  • Credit Cost Normalization Credit Cost · Q1 FY '26 onwards · Medium confidence some normalization from Q1 FY '26 onwards

    — P. Ramakrishnan, Head Investor Relations

Investment

  • E2E Networks Secondary Acquisition Completion Investment · before May 30, 2025 · High confidence 6%
    The secondary acquisition of 6% is expected to be completed before May 30, 2025.

    — P. Ramakrishnan, Head Investor Relations

Green Energy

  • Green Hydrogen PLI Total Benefit Green Energy · over a period of 3 years · High confidence around Rs 300 crores
    This incentive to be distributed over a period of 3 years will aggregate to a total benefit of around Rs 300 crores.

    — P. Ramakrishnan, Head Investor Relations

Debt

  • Metro Third-Party Debt Reduction Debt · over a period of time · Medium confidence to come down to, say, Rs 9,000 crores or so

    From almost Rs 12,600-odd crores today

    The third-party debt levels in the metro is almost Rs 12,600-odd crores. We do expect over a period of time that to come down to, say, Rs 9,000 crores or so, which will enable a further reduction in the interest cost.

    — P. Ramakrishnan, Head Investor Relations

3 min read

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.

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