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Larsen & Toubro
Our verdict on Larsen & Toubro isn’t the consensus take — see where we landed, and the one risk the bull case glosses over.
See the verdict — free →Does management do what it says?
The acquisition was completed on June 9th, which is within Q1 FY26, ahead of the previously guided Q2 FY26 timeline. (1 exceeded across 1 tracked commitment)
“we are gearing up for taking up additional maybe 10, 15 gigawatts in the next 2, 3 years.”
The NWC to sales ratio improved significantly to 10.2% as of September 2025, well ahead of the 12% year-end target. (1 met, 2 exceeded across 3 tracked commitments)
“On Working Capital, our guidance for working capital for FY '26 remains unchanged at around 12% by March 2026.”
See the full cited Management analysis of Larsen & Toubro
How durable is the business?
L&T's scale advantage has strengthened further with a record-high order book, providing multi-year revenue visibility and allowing the company to be more selective in bidding. (2 expanding)
“The order book at Rs 5,791 billion is up 22% on a y-o-y basis. This record order book provides a multi-year revenue visibility.”
The Energy segment is seeing massive growth in order prospects, particularly in international hydrocarbon and green energy markets, with a significant jump in the pipeline value. (5 expanding)
“Order Book ₹ 7332 bn Record High.”
See the full cited Business Model analysis of Larsen & Toubro
Where does growth come from?
The prospect pipeline has surged significantly to Rs 19 trillion for FY26, a 57% increase compared to the previous year, driven by massive international opportunities in Hydrocarbon and Infrastructure. (3 accelerating across 3 signals)
“Strong prospect pipeline of ~ Rs 5.9 trn for the near term”
The Hydrocarbon segment (part of Energy) continues to see strong momentum, crossing Rs 600 billion in inflows for the second consecutive year, with a 93% increase in the prospect pipeline for FY26. (4 accelerating, 1 steady across 5 signals, 2 leading indicators)
“The segment witnessed robust order inflows during the quarter with L&T Realty recording its highest ever presales in a quarter of approx Rs 50 billion... This marks the start of a phased consolidation of all real estate assets into a unified platform”
See the full cited Future Growth analysis of Larsen & Toubro
What could break the thesis?
The risk remains high as Energy segment EBITDA margins declined from 8.9% in Q2 FY25 to 7.3% in Q2 FY26. Management explicitly cites cost overruns in competitively priced legacy projects nearing completion as the primary driver. (3 intensifying, 1 easing, 1 stable, 2 high-severity)
“Subdued Hydrocarbon margin primarily due to cost overruns in certain competitively priced projects nearing completion”
The risk appears resolved as a major concern for the current quarter's operational performance. Reported PAT grew 15% y-o-y, and the company recorded a partial reversal of an earlier impairment provision as an exceptional gain. (1 resolved, 2 stable, 1 high-severity)
“*includes one-time impact of New Labour codes of 110 bps”
See the full cited Risk analysis of Larsen & Toubro
Read the full thesis on Larsen & Toubro
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