Larsen & Toubro Limited — Q4 FY26 earnings call

Call held 5 May 2026

Management summary

Larsen & Toubro reported a mixed Q4 FY26, with strong order book growth and significant improvements in working capital and Realty pre-sales. However, revenue growth for the full year missed guidance, and margins in key segments faced pressure due to execution challenges and geopolitical disruptions. The company outlined an ambitious Lakshya 31 strategic plan, targeting sustained growth and improved ROE over the next five years, with significant investments planned for new growth engines like Data Centers and Green Hydrogen.

Highlights

  • Order inflows significantly surpassed FY26 guidance, driven by ultra-mega orders across multiple sectors.

  • Order book grew 28% YoY to ₹7.40 trillion as of March 2026, ensuring strong revenue visibility.

  • Net Working Capital to Revenue ratio improved sharply to 4.1% (690 bps improvement YoY) due to higher customer advances and vendor credit.

  • L&T Realty pre-sales more than doubled to ₹94 billion in FY26, aided by successful launches.

  • L&T Finance achieved 98% retailization of its loan book and maintained healthy ROAs of 2.4% for Q4 FY26.

Concerns

  • Revenue growth for FY26 was 12% against a guidance of 15%, primarily due to subdued execution in certain domestic projects and disruptions from the West Asia conflict in March '26.

  • Projects and Manufacturing portfolio margin declined 50 bps YoY to 9.4% in Q4 FY26, reflecting changes in revenue mix and execution-related disruptions.

  • Energy segment margin in Q4 FY26 declined to 6.5% from 8.2% in Q4 FY25, impacted by cost overruns and closeout costs in legacy projects.

  • Trailing 12-month ROE declined 80 bps YoY to 15.5% as of March 2026, including a 110 bps impact from a one-time provision related to Labour Code changes.

Key financials

  1. Group Revenues 828 Bn +11%YoY
  2. Group EBITDA Margin 10.4%
  3. P&M EBITDA Margin 9.4%
  4. Recurring PAT 53 Bn +5%YoY
  5. Reported PAT 53 Bn -3%YoY
  6. NWC to Revenue Ratio 4.1%
  7. Trailing 12-month ROE 15.5%

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.

Segment breakdown

  • Infrastructure
    435 Bn Order Inflow397 Bn Revenue8.8% EBITDA Margin
  • Energy Projects
    213 Bn Order Inflow166 Bn Revenue6.5% Margin
  • Hi-Tech Manufacturing
    49 Bn Revenue
  • IT and Technology Services
    141 Bn Revenue
  • L&T Finance
    2.4% ROAs
  • Others
    16.9 Bn Revenue

Order book

high confidence

Total value

₹7.4 Tn

as of 2026-03-31 quantified

28% YoY

Inflow this quarter

₹898 Bn

Execution

Book-bill for Infra is around 27 months.

Composition

Mix 3 geographies
  • Domestic 48%
  • International 52%
  • Middle East (International) 78%

Share of order book by geography· categories overlap, and sum to 178%

Pipeline

qualified rfp

Total prospects pipeline for FY27

Cancellations & deferrals

  • cancelled: Rs 170 billion worth of orders deleted from the order book during the quarter.
  • cancelled: Three out of four previously mentioned Kuwait projects were cancelled, one survived.
  • deferred: Some deferments in project awards during the period when the Middle East conflict was most active.
Management noted strong ordering traction across domestic and international markets, leading to a robust order book and good revenue visibility, despite some project deferments and cancellations.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex Capex disclosed
    • Industrial Electronics Planned ETA over plan period ₹50 Bn
    • Semiconductor business (proprietary IPs) Planned ETA over plan period ₹30 Bn
    • Green Hydrogen Planned ETA over plan period ₹150 Bn
    • Data Center business Planned ETA over plan period ₹100 Bn
    • Realty business (commercial real estate development) Planned ₹44 Bn
    • Hydrocarbon modular fabrication yard and shipbuilding facility upgrade Planned ₹50 Bn
    Within the new business over the plan period, we envisage a capital outlay of approximately Rs 50 billion towards Industrial Electronics, Rs 30 billion into the Semiconductor business largely for the creation of proprietary IPs, Rs 150 billion in Green Hydrogen where we are also actively evaluating options for strategic partnerships to optimize capital deployment, and around Rs 100 billion towards the Data Center business. ... We are allocating almost Rs 44 billion for the Realty business, primarily to fund development of commercial real estate. ... Additionally, we plan to invest around Rs 50 billion for upgradation of our existing hydrocarbon modular fabrication yard and the shipbuilding facility.
  • Debt Debt disclosed
    • New borrowing First Indian corporate to issue an ESG bond under SEBI's sustainability-linked bond framework.
    • New borrowing Secured a sustainability-linked trade finance facility from a commercial bank, linked to ESG KPIs. $700 Mn
    On the financing front, L&T became the first Indian corporate to issue an ESG bond under SEBI's sustainability-linked bond framework, aligned with its commitments to water neutrality by 2035 and carbon neutrality by 2040. The company also secured a USD 700 million sustainability-linked trade finance facility from a commercial bank with the pricing linked to key ESG KPIs, including greenhouse gas emission intensity and freshwater withdrawal.
  • M&A L&T Semiconductor Technologies (acquisition) Acquisition · Closed

    Strengthened power module design capabilities.

    L&T Semiconductor Technologies strengthened its power module design capabilities through an acquisition during the year.
  • M&A Nabha Power Divestment · Signed

    Part of planned exit of concession portfolio.

    Assets and liabilities classified as 'Held for Sale'. Closure expected in Q1 FY27.

    The company has executed Share Purchase Agreement (SPA) to divest its 100% stake in Nabha Power and its entire stake in Hyderabad Metro. Both these transactions are expected to achieve closure in Q1 FY27.
  • M&A Hyderabad Metro Divestment · Signed

    Part of planned exit of concession portfolio.

    Assets and liabilities classified as 'Held for Sale'. Closure expected in Q1 FY27.

    The company has executed Share Purchase Agreement (SPA) to divest its 100% stake in Nabha Power and its entire stake in Hyderabad Metro. Both these transactions are expected to achieve closure in Q1 FY27.
  • Liquidity Liquidity disclosed Cash flow from operations (excluding financial services) in Q4 FY26 was Rs 171 billion, up from Rs 107 billion in Q4 FY25, indicating strong operational cash generation.
    Our cash flow from operations, excluding the financial services segment, in Q4 FY26 was at Rs 171 billion, as compared to Rs 107 billion in Q4 FY25.

Guidance & targets

Order Inflow

  • Order Inflow Growth Order Inflow · FY27 · High confidence 10-12%
    Based on this visibility and the opportunities we are pursuing, we expect the group order inflows to grow in the range of 10% to 12% in FY27.

    — P. Ramakrishnan

  • Order Inflow CAGR Order Inflow · next 5 years (Lakshya 31) · High confidence 10-12%
    Concluding with the Lakshya guidance, over the next five years, we are targeting order inflow growth at a CAGR return of 10% to 12%

    — P. Ramakrishnan

Revenue

  • Revenue Growth Revenue · FY27 · High confidence 10-12%
    On Revenue, we expect growth to be in the range of 10% to 12% for FY27.

    — P. Ramakrishnan

  • Revenue Growth Revenue · next 5 years (Lakshya 31) · High confidence 12-15%
    revenue growth of 12% to 15%

    — P. Ramakrishnan

Margin

  • PP&M Margins Margin · FY27 · High confidence stable at 7.8%
    On this reclassified basis, the FY26 margins for Projects, Products and Manufacturing was 7.8%, and we expect the same to be stable as well in FY27 as well.

    — P. Ramakrishnan

Working Capital

  • Working Capital to Sales Ratio Working Capital · FY27 · Medium confidence around 10%
    Accordingly, we are guiding the working capital to be around 10% in FY27, which remains well within our targeted range.

    — P. Ramakrishnan

Profitability

  • Return on Equity (ROE) Profitability · next 5 years (Lakshya 31) · High confidence 16-17%

    Previously 18% → 16-17%

    and a Return on Equity in the range of 16% to 17%.

    — P. Ramakrishnan

L&T Finance

  • Loan Book Growth L&T Finance · Lakshya 31 · High confidence 20%+
    The strategy emphasizes disciplined portfolio expansion and strong risk management with targets of 20% plus loan book growth, while maintaining credit costs below 2%.

    — P. Ramakrishnan

  • Credit Costs L&T Finance · Lakshya 31 · High confidence below 2%

    — P. Ramakrishnan

  • ROA L&T Finance · Lakshya 31 · High confidence 3-3.2%
    The financial outcomes under the plan are calibrated to deliver a 3% to 3.2% ROA and a 16% to 18% ROE

    — P. Ramakrishnan

  • ROE L&T Finance · Lakshya 31 · High confidence 16-18%

    — P. Ramakrishnan

LTTS

  • Revenue CAGR LTTS · over five years (Lakshya 31) · High confidence 13-15%
    The Lakshya L31 targets 13% to 15% revenue CAGR growth for over five years with EBIT margins of 16% to 17%

    — P. Ramakrishnan

  • EBIT Margins LTTS · over five years (Lakshya 31) · High confidence 16-17%

    — P. Ramakrishnan

Realty

  • Pre-sales CAGR Realty · Lakshya 31 · High confidence around 25%
    Just to add one more, that CAGR growth in pre-sales is over the Lakshya 31 is around 25% is assumed in Realty.

    — P. Ramakrishnan

Data Center

  • Capacity Data Center · over time · High confidence 200 MW
    At the moment, the thinking is that, about 200 megawatt worth of data center capacity we could create over time.

    — R. Shankar Raman

What to watch in Q1 FY27

Water Projects Execution Momentum

FY27
Current Subdued progress, patchy execution in Q4 FY26
Target Improved execution momentum and sustained collection trend

Why it matters

Improved execution in water projects is crucial for overall revenue growth and addressing past slippages.

We are hopeful that this trend will sustain with the execution momentum improving as we move into FY27. Importantly, some of the previously delayed approvals and clearances are expected to come through, which should also support improved execution going forward.

Risks & concerns

  • Middle East geopolitical conflict and supply chain disruptions

    high

    Conflict caused near-term execution impact, increased logistics/insurance costs, and led to revenue miss in Q4 FY26; expected to subside after Q1 FY27.

    Management acknowledged

  • Subdued execution progress in domestic projects

    medium

    Specifically in Water & Effluent Treatment business and due to pending clearances, contributing to FY26 revenue miss.

    Management acknowledged

  • Cost overruns and closeout costs in legacy projects

    medium

    Impacted Energy segment margins in Q4 FY26, expected to improve in a couple of quarters as projects are completed.

    Management acknowledged

  • Manpower availability and wage inflation

    medium

    Manpower is a challenge even in India, addressed by technology-enabled execution, automation, and modular solutions.

    Analyst acknowledged

  • Weather-related uncertainties (El Nino)

    low

    Could affect agriculture output and food price trends, potentially influencing inflation dynamics.

    Management acknowledged

Q&A highlights

7 direct
Impact of Middle East conflict on revenue and margins Direct
on a broad basis, we would have lost in terms of revenue almost Rs 50 billion in Q4 just on the course of supply chain issues that impacted both largely on the Infrastructure side, the projects that we are executing in the Middle East, Power Transmission & Distribution, and Renewables.

Management quantified the direct revenue impact of geopolitical issues and supply chain disruptions on Q4 performance, explaining the miss on revenue guidance.

Asked by Mohit Kumar

Risks from Middle East order book (fixed price contracts, inflation, force majeure) Direct
Firstly, instead of calling it as a risk, I think as I see it, there are more opportunities than risk at this point in time. Because all my interactions with major customers, I think they have laid down a major capital expenditure plan to expand capacities.

Management expressed optimism about Middle East opportunities despite risks, highlighting customer commitment to capex and willingness to negotiate on cost increases for fixed-price contracts.

Asked by Parikshit Kandpal

Data Center business model, capacity targets, and returns Direct
What we want to do is make sure our data center is AI enabled, which means that we will have servers and GPUs which will enable high computing to be done. ... At the moment, the thinking is that, about 200 megawatt worth of data center capacity we could create over time.

Management clarified their strategic focus for Data Centers on AI-enabled infrastructure and hyperscalers, outlining a significant capacity target and expected returns, differentiating it from traditional real estate models.

Asked by Amit Anwani

Rationale for revised ROE target in Lakshya 31 Direct
Current 16-17% factors in upfront investments in Electronics, Green Energy, Data Center (investment phase, revenue generation later). P&M return ratios more than doubled due to profitable growth at lower capital intensity.

Management explained the slight reduction in the ROE target by factoring in significant upfront investments in new growth engines, which will be in an investment phase initially, and highlighted improved P&M return ratios.

Asked by Puneet Gulati

Geographical expansion strategy for order inflow Direct
we are also looking to expand into EPC through modular systems, which means that we will try to reduce our site intensity, which means we can in a way become geography agnostic by making maximum items in our fabrication shops either in India or Middle East and getting it shipped to the global destination.

Management detailed their strategy for geographical diversification, emphasizing modular EPC systems to become less site-intensive and access a broader global market beyond traditional strongholds.

Asked by Aditya Bhartia

L&T's role in Qatar LNG facility repair and reconstruction opportunities Partial
I mean, I don't have a breakdown by country by project because that kind of information is not available. It is that $30 billion to $50 billion per my judgment or my assessment and is based on my discussion with various senior executives, and it does include the LNG train as well. ... But what it will do is that, it will keep some of my competition busy in that, so it will provide me a better opportunity for the other bids where I'm involved.

Management acknowledged the large reconstruction opportunity in Qatar but stated L&T's indirect role, implying that while they won't directly repair the existing facility, the demand will free up competitors for other bids.

Asked by B. Vijayakumar

Manpower availability and cost challenges Direct
Manpower continues to be a challenge even in India also. That's why we have laid down in our Lakshya 31 - Technology-Enabled Execution. We will look at opportunities to see how we can do more automation. ... We will also look at modular solutions.

Management identified manpower as a key challenge and outlined strategic initiatives under Lakshya 31, including technology-enabled execution, automation, and modular solutions, to mitigate this risk.

Asked by Amit Mahawar

Domestic execution impact from supply chain costs and labor Direct
When I gave the guidance for FY27, I did mention in my script saying that Q1, Q2 will have an impact, mostly from Middle East, but for domestic also there will be some impact because of supply chain.

Management confirmed that domestic execution would also face some impact from supply chain issues in H1 FY27, similar to the Middle East, indicating broader operational headwinds.

Asked by B. Vijayakumar

2 min read 6 chapters

Detailed narrative

FY26 Performance Overview and Guidance Miss

Larsen & Toubro reported a 12% revenue growth for FY26, falling short of its 15% guidance. This miss was attributed to subdued execution in domestic projects, particularly in the Water & Effluent Treatment business, and disruptions caused by the West Asia conflict in March '26, which impacted supply chains. Despite this, the company's order inflows significantly surpassed its 10% guidance, driven by ultra-mega orders across various sectors, leading to a robust order book of ₹7.40 trillion, up 28% YoY.

Middle East Operations and Geopolitical Impact

The Middle East remains a strategically significant market for L&T, contributing almost ₹3 trillion to the order book as of March '26. While all project sites are functioning and no cancellations have occurred, the conflict caused near-term execution impacts due to supply chain constraints and increased logistics and insurance costs. Management is actively discussing cost relief with clients and expects overall normalcy to return after Q1 FY27, with bidding activity already resuming for new projects.

Lakshya 31: Strategic Vision and Growth Engines

L&T unveiled its Lakshya 31 strategic plan for FY27-FY31, targeting an order inflow CAGR of 10-12%, revenue growth of 12-15%, and an ROE of 16-17%. The plan focuses on scaling existing businesses and building selective future growth engines. Significant capital outlays are planned for Industrial Electronics (~₹50 billion), Semiconductor business (~₹30 billion), Green Hydrogen (~₹150 billion), and Data Center business (~₹100 billion), with an additional ~₹44 billion for Realty development.

Segmental Performance and Margin Pressures

The Projects and Manufacturing portfolio saw its EBITDA margin decline 50 bps YoY to 9.4% in Q4 FY26, influenced by changes in revenue mix and execution disruptions. The Energy segment's margin specifically dropped to 6.5% from 8.2% in Q4 FY25 due to cost overruns and closeout costs in legacy projects, though management expects improvement in the coming quarters. In contrast, the Infrastructure segment's EBITDA margin improved to 8.8% due to a favorable job mix.

Working Capital and Cash Flow Improvement

The company demonstrated strong working capital management, with the Net Working Capital to Revenue ratio improving sharply to 4.1% in March '26 from 11% in March '25. This improvement was driven by higher customer advances and increased vendor credit. Cash flow from operations (excluding financial services) also saw a significant increase to ₹171 billion in Q4 FY26, up from ₹107 billion in Q4 FY25, indicating robust operational cash generation.

Realty Business and Concession Asset Divestments

L&T Realty achieved significant growth, with pre-sales more than doubling to ₹94 billion in FY26. The company's strategy for Realty under Lakshya 31 involves scaling through land acquisitions, township development, and commercial portfolio expansion, targeting a pre-sales CAGR of ~25%. Furthermore, L&T has executed SPAs for the divestment of its stakes in Nabha Power and Hyderabad Metro, with closure expected in Q1 FY27, aligning with its objective to exit the concession portfolio.

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