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Informist, Sunday, Jul. 26, 2026

 

By Rajesh Gajra

 

MUMBAI – The sales and net profit of capital goods behemoth Larsen & Toubro Ltd. are seen to have been scathed by overseas and domestic conditions in the June quarter. The company is expected to post the lowest year-on-year growth in net profit as well as revenue from operations in six June quarters. The execution of projects by the company in its core businesses of engineering, procurement, and construction is seen to have been disrupted by the West Asia war.

 

In the company's India operations, the execution is expected to have, as brokerage Nomura Equity Research put it in its report, "remained in the slow lane". The expected weakness in the top line is seen weighing down the bottom-line growth, while interest costs are seen benign. The financial performance of L&T's non-core business of services is known, with its three listed subsidiaries having reported strong net profit and revenue growth for the June quarter.

 

L&T is expected to report a consolidated net profit of INR 38.50 billion, up 6.4% on year, according to the average of estimates from 11 brokerages. Sequentially, the net profit is seen down 27%. The highest estimate for the net profit is INR 43.51 billion from 360 ONE Capital Market Pvt. Ltd. and the lowest is INR 33.52 billion from PhillipCapital (India) Pvt. Ltd.

 

The company's consolidated revenue from operations for the quarter is expected to be INR 685.64 billion, up 7.7% on year and down 17% on quarter. The highest estimate for the revenue is INR 707.03 billion from 360 ONE Capital and the lowest is INR 643 billion from Motilal Oswal Financial Services Ltd.

 

In its services business, the company has one listed financial services subsidiary, L&T Finance Ltd., and two listed technology subsidiaries, LTM Ltd. and L&T Technology Services Ltd. L&T Finance, in which L&T has 65.96% stake, had on Jul. 10 reported a rise of 29% on year in its consolidated net profit for the June quarter to INR 9.02 billion and a 22% increase in its revenue from operations to INR 52.13 billion.

 

L&T Technology Services, in which L&T holds 73.5% stake, had on Jul. 14 reported 13% year-on-year growth in consolidated net profit to INR 3.57 billion, on the back of revenue growth of 11% to INR 29.40 billion.

 

LTM Ltd., in which L&T has 68.5% stake, had on Jul. 11 reported 17% increase on year in consolidated net profit for the June quarter to INR 14.66 billion, and 18% rise in revenue from operations to INR 116.08 billion.

 

But for L&T's core businesses of engineering, procurement, and construction, the brokerages' expectations for revenue growth range widely from flat to around 7%. "Execution is likely to remain muted, with 7% YoY (year-on-year) revenue growth, as supply-chain, logistics, and commodity pressures weigh on the core business," BofA Securities said in its report.

 

Kotak Securities expects low 6% growth on year in L&T's execution in its core segments on account of a disruption in overseas execution due to the West Asia war and limited recovery in execution in domestic water projects. Along with exposure to West Asia, labour shortages in domestic projects are likely to flatten the core businesses' revenue growth in the June quarter, according to Motilal Oswal.

 

On order inflows in the core businesses, BofA Securities expects them to fall by a substantial 24% on year to INR 585 billion. The brokerage said the company's order announcements were "soft" at INR 233 billion. Announcements of order inflows were limited for the quarter, Kotak Securities said. According to brokerage Prabhudas Lilladher Pvt. Ltd., L&T had announced order inflows in the range of INR 155 billion-INR 275 billion led by one mega order win from JSW Steel.

 

The consolidated earnings before interest, tax, depreciation, and amortisation of L&T are expected to be INR 64.67 billion for the June quarter, according to an average of estimates by 10 brokerages, up slightly from INR 63.2 billion in the year-ago quarter. But the profitability of the company will likely be hit as the ratio of fixed costs to revenue is seen rising, given the slowing down of project execution. The consolidated EBITDA margin is expected to be 9.62%, down from 9.9% in the year-ago quarter, as per the average of estimates from five brokerages.

 

For the company's core businesses, Motilal Oswal expects an on-year contraction of 40 basis points in the EBITDA margin to 7.3%, while Kotak Securities expects a decline of 50 bps. The brokerages attribute the decline mostly to the same factors that are expected to drag down the company's revenue growth for the quarter.

 

The bottom-line growth will largely track the EBITDA trajectory. Motilal Oswal expects a fall in interest costs to help the company's net profit. The brokerage expects interest costs to halve to INR 4 billion in the June quarter from INR 8 billion in the year-ago quarter. The decline in interest rates over the past year and more and L&T's low borrowing levels are seen driving interest costs lower. The brokerage also expects L&T's reported net profit for the quarter to benefit from a one-off gain of INR 9 billion from the sale of Nabha Power Ltd. L&T's wholly-owned subsidiary, L&T Power Development Ltd., had Jun. 25 received INR 36.32 billion for selling its equity stake in Nabha Power to Torrent Power Ltd.

 

Larsen & Toubro will announce its earnings for the June quarter Tuesday. Following the announcement, brokerages expect investors to keep a close watch on the company's updates on the execution of domestic projects, order pipeline, execution revival in West Asia, and order inflow ramp-ups from domestic and overseas projects. Investors will also monitor the company's update on the impact on outstanding debt from the full divestment of its stake in L&T Metro Rail (Hyderabad) Ltd. to Hyderabad Metro Rail Ltd., a Telangana state-owned company, at the end of April.

 

Friday, shares of Larsen & Toubro ended at INR 3,785.60 on the National Stock Exchange, down slightly from Thursday. The shares are down 6.6% from the date the March quarter earnings were announced. Of 15 brokerage reports on the company available with Informist, 13 have a "buy" call on the stock at an average target price of INR 4,595, while two have a "hold" recommendation.

 

Following are the June quarter earnings estimates for Larsen & Toubro Ltd. from 11 brokerages, in descending order of the net profit estimate, in INR billion:

 

Brokerage	Net Sales	Net Profit	EBITDA
360 ONE Capital Market Pvt. Ltd.	707.03	43.51	---
Kotak Securities Ltd.	695.00	40.72	67.46
HDFC Securities Ltd.	699.30	40.00	67.30
BofA Securities	680.00	39.46	65.88
Nomura Equity Research	688.62	39.21	65.12
JM Financial Institutional Securities Pvt. Ltd.	692.28	38.99	65.99
Prabhudas Lilladher Pvt. Ltd.	684.29	38.23	65.30
Motilal Oswal Financial Services Ltd.	643.00	38.00	62.00
Elara Securities (India) Pvt. Ltd.	687.81	37.50	63.89
Nuvama Wealth Management Ltd.	669.85	34.38	59.55
PhillipCapital (India) Pvt. Ltd.	694.85	33.52	64.17
Average	685.64	38.50	64.67

 

End

 

Edited by Rajeev Pai

 

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