Summary
Larsen & Toubro Limited - Q3 FY 2026 Earnings Call Summary Wednesday, January 28, 2026, 7:00 PM IST
Event Participants
Executives 2 Mr. P. Ramakrishnan (Head - Investor Relations), Mr. Subramanian Sarma (Deputy Managing Director and President)
Analysts 10 Aditya Bhartia (Investec), Aditya Mongia (Kotak), Amit Anwani (PL Capital), Amit Mahawar (UBS), Atul Tiwari (JPMorgan), Bharani V. (Avendus Spark), Mohit Kumar (ICICI Securities), Mohit Pandey (Citi), Priyankar Biswas (JM Financial), Puneet Gulati (HSBC), Sumit Kishore (Axis Capital)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Order Inflow (Group) | ₹1.36 trillion | +17% YoY; Highest ever quarterly inflows driven by domestic private demand and international renewables. |
| Order Book (Group) | ₹7.33 trillion | +30% YoY; 92% concentration in Infra and Energy; 49% of the mix is international. |
| Revenue (Group) | ₹714 billion | +10% YoY; Driven by Hi-Tech Manufacturing, Energy projects, and IT&TS segments. |
| EBITDA Margin (Group) | 10.4% | +70 bps YoY; Improvement due to operational efficiencies across core businesses. |
| P&M EBITDA Margin | 8.1% | +50 bps YoY; P&M portfolio margins improved despite headwinds in Hydrocarbon. |
| Recurring PAT | ₹44 billion | +31% YoY; Reflects higher activity levels and efficient treasury management. |
| Reported PAT | ₹32 billion | -4% YoY; Impacted by a ₹11.9 billion one-time provision for new Labour Codes. |
| Net Working Capital / Rev | 8.2% | -450 bps YoY; Sharp improvement from 12.7% due to strong customer collections. |
| Return on Equity (ROE) | 16.5% | +40 bps YoY; Underlying ROE is 17.6% after adjusting for one-time Labour Code impact. |
Geographic & Segment Commentary
Infrastructure: Segment order inflow grew 26% YoY, reaching an order book of ₹4.24 trillion. While international execution remains strong, domestic revenue growth was a modest 5% due to execution calibration in the Water segment following funding headwinds. The segment maintains a 26-month book-to-bill ratio with a near-term pipeline of ₹4.02 trillion.
Energy (Hydrocarbon & CarbonLite): Order inflows rose to ₹460 billion, supported by ultra-mega offshore wind and domestic utility orders. Margins declined to 5.9% (from 8.3% YoY) due to cost overruns in legacy projects secured during the COVID/Ukraine war period. Management expects these stressed projects to conclude within 2-3 quarters.
Hi-Tech Manufacturing: Segment revenue grew 34% YoY to ₹33 billion, driven by an execution ramp-up in Precision Engineering & Systems (PES). The order book stands at ₹379 billion, focuses on defense (RPAS program) and nuclear energy solutions.
IT & Technology Services: Revenues grew 12% YoY to ₹135 billion, benefiting from operational efficiencies and forex tailwinds. This segment remains a key driver of group profitability, with margins improving during the quarter.
Financial Services & Others: L&T Finance reached 98% retailization with an ROA of 2.31%. L&T Realty recorded its highest-ever quarterly presales of ₹50 billion, primarily driven by a successful residential launch in Noida.
Company-Specific & Strategic Commentary
Realty Consolidation: L&T has initiated a slump-sale of its Realty business to a wholly owned subsidiary (L&T Realty Properties Limited). This phased consolidation aims to create a unified platform with greater agility for large-scale real estate opportunities.
Strategic Defense Partnerships: The Precision Engineering segment partnered with General Atomics for the 87 MALE RPAS program. L&T will act as the prime bidder, positioning the company as a leader in advanced remotely piloted aircraft systems in India.
New Energy Rebranding: The data center business has been rebranded as “Larsen & Toubro-Vyoma.” Management is targeting hyperscale facilities in Mumbai, Chennai, and Bangalore to support high-performance computing.
Green Energy Focus: The company successfully designed a 100% indigenous 4 MW electrolyzer stack, with plans to scale to 8–10 MW. International water projects are shifting focus toward desalination and transmission in the GCC region.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Order Inflow | >10% Growth for FY26 | Upgraded from earlier 10% target due to 30% growth in 9M FY26 and strong pipeline. |
| Revenue Growth | 15% for FY26 | Retained guidance; management anticipates customary Q4 execution ramp-up. |
| P&M EBITDA Margin | 8.5% for FY26 | 9M FY26 performance of 7.9% is on track for full-year target despite Hydrocarbon drag. |
| Net Working Capital / Rev | ~10% by March 2026 | Revised downward from 12% due to exceptionally strong collection intensity. |
Risks & Constraints
| Risk | Context |
|---|---|
| Hydrocarbon Margins | Legacy projects won during COVID/Ukraine war are experiencing cost overruns. Management expects margin softness to persist for another 2-3 quarters until these projects are handed over. |
| Domestic Infrastructure | Funding delays in central government plans for Water & Effluent projects have slowed execution. Management is calibrating activity based on fund receipt to protect working capital. |
| Commodity Volatility | While steel remains stable, copper and nickel prices are volatile. L&T mitigates this through pre-bid engineering, early procurement, and hedging 90-95% of exposure. |
Q&A Highlights
Project Deferrals in Kuwait
- Question: What is the status of the canceled Kuwait projects? (Mohit Kumar)
- Answer: These projects were never in the official order book. They were canceled due to budgetary misalignment but are strategically essential for Kuwait’s production; they are expected to be re-tendered and awarded within the calendar year. (Subramanian Sarma)
Hydrocarbon Execution & Margins
- Question: Why was Hydrocarbon revenue growth low, and when will margins recover? (Sumit Kishore)
- Answer: Revenue growth was 15%; margin pressure stems from a few stressed “legacy” projects. Recovery is expected in 2-3 quarters as these projects reach the termination phase. (P. Ramakrishnan/S. Sarma)
Chinese Competition in Thermal Power
- Question: Will the allowance of Chinese players in BTG orders impact L&T? (Amit Anwani)
- Answer: The allowance is limited to specific components and alloys, not full equipment. This actually helps L&T import necessary special alloys previously restricted, while domestic manufacturing remains protected. (Subramanian Sarma)
TenneT HVDC Framework
- Question: How many packages from the TenneT offshore order are booked? (Aditya Bhartia)
- Answer: Two packages are currently in the order book. L&T has been selected for the full 6-package (12 GW) program, and subsequent packages will be recorded only when the customer “calls them out.” (Subramanian Sarma)
Key Takeaway
Larsen & Toubro delivered a robust Q3 FY 2026, headlined by record quarterly order inflows of ₹1.36 trillion and a 30% YoY growth in the total order book to ₹7.33 trillion. Strategic pivot toward the private sector is evident, with its share in the domestic order book rising to 36% from 21% in March 2025. Financially, the company demonstrated exceptional working capital management, reducing the NWC-to-Revenue ratio to 8.2% via aggressive collections. While the Hydrocarbon segment faces temporary margin dilution from the completion of legacy COVID-era projects, the overall P&M margin improved to 8.1%. Management remains confident in achieving 15% revenue growth for FY26, supported by a strong ₹5.92 trillion prospects pipeline. Future growth is increasingly anchored in high-tech manufacturing, defense partnerships, and energy transition projects (Renewables/Green Hydrogen) across India and the Middle East, while domestic infrastructure execution remains contingent on government fund allocations in the water segment.
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