L&T's Offshore Wind Pivot Offsets Middle East Disruptions

Strong order inflow growth and working capital gains mask a volatile quarter as L&T leans into European energy transition.

LT.NS · Earnings Call · 2026-07-28

Q1 FY27: Resilience Amid Geopolitical Headwinds

Larsen & Toubro reported a resilient Q1 FY27, with order inflows climbing 14% year-over-year to INR 1,080 billion, even as the ongoing Middle East conflict weighed on execution. The standout was the Offshore Wind business, which secured an ultra-mega order under the TenneT North Sea HVDC program, taking cumulative capacity secured to roughly 8 gigawatts. As the CFO noted: “The Offshore Wind business secured an ultra mega order under TenneT North Sea HVDC Offshore Wind program, taking the cumulative offshore wind transmission capacity secured over the past 3 quarters to approximately 8 gigawatts” — Parameswaran Ramakrishnan, Chief Financial Officer · 2026-07-28. Revenue growth was more subdued at 7% year-over-year to INR 679 billion, hit by supply chain disruption in the Gulf region and a slower start in some domestic projects. Despite this, the group PAT rose 14% to INR 41 billion, aided by treasury income and a stronger services business. The company's working capital improvement was striking: the NWC-to-sales ratio dropped from 10.1% a year ago to 4.9%, reflecting strong collections and disciplined execution.

New Growth Engines and Margin Pressures

The quarter also marked a strategic realignment, with the creation of the Energy Green segment that now houses renewables and offshore wind. This segment saw order inflows surge 58% year-over-year, led by the TenneT win. However, margins remain under pressure: group EBITDA margin fell to 9.0% from 9.9% due to lower execution, FX variation, and higher ECL provisions. The CFO explained that ECLs were tied to aging receivables, particularly in the water and effluent treatment business:

It is like this, that what happens is ECL provisions are basis the aging of the receivables. As you are aware, we have been mentioning even in the previous year, there has been some amount of collection shortfall...
Parameswaran Ramakrishnan, Chief Financial Officer · 2026-07-28

. Despite these headwinds, management reiterated full-year guidance for 10-12% order inflow growth and a PP&M margin of 7.8%. The order book stands at INR 7.79 trillion, up 27% year-over-year, with 52% from international markets, reflecting the success of the offshore wind push.

Looking Ahead: Confidence in the Pipeline

Management remains confident in the opportunity pipeline of approximately INR 15 trillion, though they acknowledged some temporary slowdown in Middle East awards. As the Deputy MD put it, “the prospect list still holds good and many of the projects are progressing as per the plan. And very soon, you will see some announcements coming from our side with respect to new awards in the Middle East.” — Subramanian Sarma, Deputy Managing Director and President · 2026-07-28 This optimism builds on earlier comments about the Middle East recovery, such as the prior call when they stated “these projects cannot be canceled because these are strategically important projects... they will come back.” — Subramanian Sarma, Executive (likely senior management, possibly CFO or Business Head) · 2025-10-29. Overall, L&T is navigating a delicate balance: leveraging its offshore wind expertise to diversify earnings while containing cost overruns from legacy fixed-price contracts. The strong order book and improving working capital dynamics provide a solid foundation, but the near-term revenue trajectory remains sensitive to geopolitical developments.