L&T & Budget 2026: Capex Boost & Policy Shifts to Drive Growth

Budget 2026 Reinforces L&T's Growth Trajectory

Union Budget 2026, presented by Finance Minister Nirmala Sitharaman, has laid out a clear roadmap for sustained infrastructure-led growth, placing companies like Larsen & Toubro (L&T) in a favorable position. With a significant increase in capital expenditure and targeted policy interventions, the budget aligns closely with the expectations of the infrastructure sector, providing strong tailwinds for India's largest engineering and construction conglomerate.

Record Capital Expenditure Fuels Order Book Visibility

The cornerstone of the budget for the infrastructure sector is the substantial increase in the public capital expenditure outlay. The allocation has been raised to ₹12.2 lakh crore for the financial year 2026-27, a notable step up from the ₹11.2 lakh crore allocated for 2025-26. This sustained government spending is critical for L&T, whose order book is a direct reflection of the nation's capex cycle. This increased funding will flow into key areas such as roads, railways, urban infrastructure, and water projects, all of which are core operating segments for the company.

Ahead of the budget, L&T's CFO, R Shankar Raman, had anticipated a nearly 10% increase in the infrastructure outlay, an expectation that the government has met. This commitment ensures a robust pipeline of projects, enhancing revenue visibility and supporting L&T's growth targets.

A Call for Quality Over Cost in Project Tendering

A significant point raised by L&T's management has been the need for procurement reforms, specifically moving away from the lowest-cost (L1) bidding system. Mr. Raman advocated for a balanced, quality-cum-cost-based selection model that considers technical competence and execution track record. While the budget speech did not announce a direct overhaul of the L1 system, its broader emphasis on creating high-quality, resilient infrastructure aligns with this industry demand. The government's focus on timely project completion and efficiency indirectly supports established players like L&T, who compete on quality and execution capabilities.

Key Budget 2026 Announcements Impacting L&T

Expanding into New-Age Sectors

The budget also provides a strategic push into sectors where L&T is building capabilities. The ₹20,000 crore outlay for Carbon Capture, Utilization, and Storage (CCUS) is a direct positive for L&T's green energy ambitions. Similarly, the continued support for electronics components manufacturing and the establishment of high-tech tool rooms for the capital goods sector will benefit L&T's hi-tech manufacturing and systems businesses.

Mr. Raman dismissed fears of public spending crowding out private investment, stating that ample liquidity exists. He noted that private capex is already picking up in sectors like steel, automobiles, and electronics. The budget's measures to support MSMEs through dedicated growth funds and enhanced liquidity via the TReDS platform will further strengthen L&T's extensive supply chain ecosystem.

De-risking Projects and Boosting Investor Confidence

A crucial policy announcement is the proposal to set up an Infrastructure Risk Guarantee Fund. This fund will provide partial credit guarantees to lenders, making it easier to finance large-scale projects by mitigating construction-phase risks. For a company like L&T, this translates into a healthier and more financially viable project pipeline, reducing uncertainty for both developers and EPC contractors.

This positive policy environment is reflected in market sentiment. Analysts have maintained a bullish outlook on L&T, viewing it as a prime beneficiary of India's capex recovery. The budget's clear focus on infrastructure reinforces this thesis, suggesting a strong performance outlook for the company.

Conclusion: A Clear Path Forward

Union Budget 2026 provides a clear and supportive framework for Larsen & Toubro. The combination of a record capital outlay, strategic policy initiatives like the risk guarantee fund, and a focus on new-age sectors like green energy provides multiple growth levers for the company. By continuing to prioritize public investment, the government has solidified the foundation for a strong order pipeline, positioning L&T to play a pivotal role in building the infrastructure for 'Vikasit Bharat'.