L&T’s FY26 Guidance: Strong Pipeline, Measured Ambitions

Larsen & Toubro (L&T) has begun FY26 with guidance that analysts are terming as conservative despite the company achieving strong financials and an all-time high order book. Engineering and construction giant L&T is guiding for 10% increase in order inflows and a 15% increase in revenues in FY26, even when FY25 saw exceptionally strong performances with order inflows increasing by 20% and core segments' revenues up 19% year-on-year.

Key Highlights

L&T closed FY25 with a consolidated order book of ₹5.79 lakh crore, 21% higher year-on-year, and a FY26 prospect pipeline at a record ₹19 trillion, 57% higher than the previous year, led by robust international opportunities, particularly in the Middle East, US, Europe, and Africa.

International orders represented 70% of the total orders in Q4, a spectacular jump from 35% a year ago, which indicates L&T's expanding global presence.

FY25 core E&C order inflows were ₹2.89 trillion, with international inflows 54% higher year-on-year, while domestic inflows fell 14%.

The firm recorded a 25% year-on-year increase in Q4 profit, ahead of expectations, and declared a ₹34 per share final dividend.

For FY26, management is forecasting 15% revenue growth and a core margin expansion to 8.5% from 8.3% in FY25, indicating gains in operational efficiency.

L&T's local opportunity pipeline is stagnant at ₹7 trillion, whereas foreign opportunities have grown to ₹12 trillion, reflecting the company's strategic shift to international markets. 

Is L&T Under-Promising?

Market analysts mention that L&T's order inflow guidance of 10% growth is conservative considering the record ₹19 trillion pipeline and the firm's past record of a 20-25% conversion rate of prospects. The robust international momentum, especially in the areas of renewables and transmission, and the firm's capability to execute large-scale projects worldwide, indicate the possibility of these numbers being beaten if macro and geopolitical factors remain stable.

Brokerages are optimistic about L&T's long-term story, although they have cut their near-term earnings forecasts marginally on concerns over pace of execution and potential delays in order conversion, particularly in the backdrop of global uncertainties. The company's emphasis on selective bidding and operational prudence is viewed as a judicious strategy to maintain margins and contain risk.

Investor Reaction

L&T shares rose as much as 5% after results, ranking among the Nifty 50's top gainers, as investors welcomed the firm order book, strong Q4 performance, and management's optimism about future global growth.

Bottom Line

Though L&T's FY26 guidance can appear conservative compared to its past performance and the order pipeline size, it represents a prudent approach under the backdrop of global uncertainties. The firm's robust execution, growing international presence, and operating discipline put it in a position to beat even its own conservative estimates if the market conditions are favorable.

Sources: Business Standard, Moneycontrol, CNBC TV18, Reuters, Trade Brains