Larsen & Toubro: Strong Order Inflows and Strategic Expansion Drive Q2 FY26 Performance

Larsen & Toubro (L&T), India's engineering and construction giant, delivered a robust performance in the second quarter and first half of fiscal year 2026, showcasing significant growth in order inflows and a healthy expansion of its order book. The company reported consolidated group revenues of ₹67,984 crore for Q2 FY26, marking a 10% year-on-year increase. This growth was underpinned by strong execution momentum across its Energy and Hi-Tech Manufacturing segments, even as the Infrastructure Projects segment experienced some temporary headwinds. The company's Profit After Tax (PAT) for the quarter rose by 16% year-on-year to ₹3,930 crore, reflecting improved activity levels and efficient treasury management.

The quarter's standout feature was the exceptional order inflow, which surged by 45% year-on-year to ₹115,800 crore. This broad-based demand, particularly from domestic and international markets, propelled the Projects & Manufacturing (P&M) portfolio to a 54% year-on-year growth in order inflows. The sustained momentum expanded L&T's order book to a formidable ₹667,041 crore as of September 2025, representing a 31% year-on-year increase and providing substantial revenue visibility for the coming years. International orders played a crucial role, constituting 65% of the P&M portfolio's order inflows for the quarter and 49% of the total order book, with the Middle East being a dominant contributor.

Segmental Performance Highlights

L&T's diverse business segments contributed to the overall performance, albeit with varying dynamics. The Infrastructure Projects segment, despite a marginal 1% year-on-year revenue decline to ₹31,759 crore due to an extended monsoon season and slower progress in rural water supply projects, saw its EBITDA margin improve to 6.3% from 6.0% in Q2 FY25, driven by enhanced execution efficiency. The Energy Projects segment demonstrated robust growth, with revenues soaring by 48% year-on-year to ₹13,082 crore, fueled by execution ramp-up in international Hydrocarbon projects. However, its EBITDA margin softened to 7.3% from 8.9% due to cost overruns in certain projects nearing completion.

Hi-Tech Manufacturing reported a strong 33% year-on-year revenue growth to ₹2,754 crore, with an improved EBITDA margin of 14.7% (up from 12.8%), benefiting from operational efficiencies in Heavy Engineering. The IT & Technology Services segment recorded a 13% revenue growth to ₹13,274 crore, but experienced margin compression, with EBITDA margin at 20.2% compared to 21.0% in Q2 FY25, primarily due to subdued margins in LTTS and costs associated with newly incubated businesses. Financial Services continued its strong trajectory with a 9% increase in income from operations and a 6% rise in PAT.

Financial Summary Table (Q2 FY26)

Strategic Initiatives and Outlook

L&T is actively pursuing strategic initiatives to capitalize on emerging opportunities and strengthen its market position. The company has entered into several MOUs and partnerships across Renewables, Green Energy, Defence, and Semiconductor businesses. Notable among these are an MOU with ACWA Power for a green ammonia project in Saudi Arabia, a joint development agreement with ITOCHU Corporation for another green ammonia project in Gujarat, and a strategic partnership with Bharat Electronics for the AMCA program. L&T Semiconductor Technologies also acquired power module design assets and is establishing a national 2D innovation hub, aiming to place India at the forefront of semiconductor research.

In a significant development, L&T reached an in-principle understanding with the Government of Telangana for the stake sale in Hyderabad Metro, with the transaction expected to be consummated by the end of FY26. This move reflects the company's disciplined capital allocation strategy and focus on core strengths. The company also secured a sustainability-linked trade finance facility of USD 700 million, aligning its operations with international sustainability standards.

Segment Revenue Comparison (Q2 FY26 vs Q2 FY25)

Management Confidence and Future Trajectory

Management expressed strong confidence in the company's future trajectory. They are optimistic about exceeding their full-year FY26 guidance of 10% growth in group order inflows and maintaining a 15% revenue growth guidance. The full-year EBITDA margin target for the P&M business remains at 8.5%, with working capital expected to be around 12% by March 2026. The robust prospect pipeline, particularly in Infrastructure and Hydrocarbon, suggests continued strong ordering activity. L&T's strategic focus on high-growth areas, disciplined project execution, and proactive risk management position it well to leverage India's economic optimism and the stable growth in key international markets. The company's ability to secure ultra-mega orders and its commitment to capital efficiency underscore its strong foundation for sustained value creation.