Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Larsen & Toubro Ltd (NSE: LT) Q4 2026 Earnings Call dated May. 05, 2026
Corporate Participants:
Parameswaran Ramakrishnan — Head, Investor Relations
Analysts:
Parikshit Kandpal — Analyst
Mohit Kumar — Analyst
Aditya Mongia — Analyst
Aditya Bhartia — Analyst
Unidentified Participant
Renu Baid — Analyst
Presentation:
Operator
Ladies and gentlemen, good evening and welcome to Larsen and Toubro Limited Q4FY26 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Msnathi Ramakrishnan from Larsen and Toubro.
Thank you. And over to Mr. Ramakrishnan.
Parameswaran Ramakrishnan — Head, Investor Relations
Thank you. Good evening ladies and gentlemen. Very warm welcome to all of you to the Q4FY26 earnings call of Larsen and Toubro. The earnings presentation was uploaded on the Stock Exchange and on our website around 6.20pm I hope you have had a chance to take a quick look at the numbers and the presentation details. I will first walk you through the important highlights for Q4FY26 and the full year FY26 followed by an overview of a strategic plan for the next five years. That is Lakshya 31 after which we will take questions.
Kindly note that when the Q and A session starts I will also have with me our Deputy Managing Director and President Mr. Subranam Sharma and our President whole time Director and CFO Mr. R. Shankar Raman. Before I begin the overview, the important disclaimer from our end. The presentation which we have uploaded on the Stock Exchange and our website today, including the discussions we may have on the call today, may contain certain forward looking statements concerning our business prospects and profitability which are subject to several risks and uncertainties and the actual results could materially differ from those in such forward looking statements.
I would request you to go through the detailed disclaimer which is available in slide 2 of our earnings presentation which was uploaded earlier today. I’ll start with a brief overview of economic conditions in India and in the Middle East. The two primary geographies for our projects and manufacturing business along with a qualitative update on our business operations. The economic growth in India for FY27 is expected to be around 6.9% supported by resilient household demand, sustained public capital expenditure and continued strength in the services sector.
Growth conditions however, remain subject to external headwinds including geopolitical developments, global energy supply dynamics, softer external demand and periods of financial market volatility. The headline inflation is expected to remain below 5% staying within the medium term comfort range. The inflation dynamics may nonetheless be influenced by pressures from elevated energy prices, higher logistic costs and the volatility in the global commodity markets. Weather related uncertainties, including the possibility of El Nino conditions, could also affect agriculture output and food price trends.
Persistently high fuel prices may have implications for fiscal calibration over the medium term. Nonetheless, the domestic economy remains supported by sound macroeconomic fundamentals with steady demand providing resilience even as growth becomes sensitive to external and climate related influences. Across the Middle east, the economic impact of the ongoing conflict in West Asia can be viewed across immediate and medium term horizons. In the near term, disruptions to energy production and exports, constraints on key trade routes and a weakening in confidence have weighed on economic activity across the region.
Despite these pressures, the GCC has demonstrated resilience underpinned by low public debt levels, substantial foreign exchange reserves and strong sovereign balance sheet that have helped preserve currency stability, banking sector soundness and fiscal discipline. In the medium term, assuming an improvement in geopolitical conditions and as far as reform incentives initiatives gather pace, the region’s underlying growth potential remains intact. While global economic fragmentation continues to influence trade flows, investment activity and overall sentiment, the Middle east structural strengths and reform momentum provide a constructive foundation for medium term growth against this broader regional backdrop, Let me now update you within our operations in the Middle east on the Middle east situation.
We would like to clarify that all our project sites are functioning as of date, all our employees and workforce are safe and none of our projects have been cancelled. The Middle east remains a strategically significant market for Alasseran toubro and as of 31st March 26th we have an order book of almost 3 trillion coming from the region. While we do anticipate some near term impact on execution, primarily due to supply chain constraints, we are working closely with our clients on alternate routes and logistic arrangements to ensure minimal disruption.
We largely operate with the government owned clients on priority national projects and our clients have been extremely supportive throughout this period. So far we have not seen any project cancellations and the payments from clients continue to be received as per schedule. While we did observe some deferments in project awards during the period when the conflict was most active, the bidding activity since then has resumed and we do not foresee cancellations of projects in which we are actively participating.
In terms of input costs, the most significant impact has been in logistics and insurance which have increased materially. We engage in active discussions with the clients to seek appropriate relief for such costs. Having covered the macro landscape and also having provided an update on the Middle East, I would like to now share a few key highlights for the quarter and for the year. We start with infrastructure. We witnessed strong ordering traction across both domestic and international markets during the year.
On the domestic front, we witnessed strong momentum in the private sector ordering across our buildings and factories, minerals and metals and heavy civil infrastructure businesses. Internationally. We benefited from ongoing opportunities in energy transition and core national infrastructure projects in the Middle east while our expansion initiatives in Central Asia progressed steadily. I come to energy now in FY26. The energy segment secured multiple high value orders across onshore offshore carbon light solutions and offshore wind.
The wind spanned across Saudi Arabia, Qatar and India in the hydrocarbon space while carbon light orders were largely domestic private sector driven. During the year the company achieved a major milestone in its offshore wind business by securing a critical role in the prestigious HVDC offshore wind program of Tenet, the Dutch German transmission system operator. These multiple high value orders enable the energy segment total order inflow to cross 1 trillion for the first time on an annual basis.
I now go to high tech manufacturing. This business focused on strategic partnerships to enhance the technical and commercial depth across the precision engineering and systems and the heavy engineering businesses. The key initiatives included a consortium with Baruch Electronics for the AMCA program, a partnership with General Atomics to manufacture medium altitude long endurance drones in India and an MoU, with whom international Asia for advanced heat transfer solutions for nuclear and thermal power applications.
I now come to the IT and technology services domain. The Delta center business, rebranded as Larsen and Togo Bioma advanced its growth agenda by commissioning the 12 megawatt capacity at Kanchipuram with an additional 6 megawatt at an advanced stage of commissioning bringing the total capacity available to 30 megawatt. Positioning the platform to drive LNT’s hyperscale data center expansion catering to high performance computing and advanced data storage requirements. LNT Semiconductor Technologies strengthened its power module design capabilities through an acquisition during the year.
I come to Financial Services in July 2025. L&T Finance received its debut international investment grade ratings from S and P Global and Fitch in Q1FY26. It also expanded into gold loans business through an inorganic route. I come to development projects in line with the Lakshya 2026 objectives. That’s the period between FY22 and FY26. LNT has made significant progress in its planned exit of the concessions portfolio. The company has executed share purchase agreement to divest its 100% stake in Naba Power and its entire stake in Hyderabad Metro.
Both these transactions are expected to achieve closure in Q1FY27 coming to LT Realty for the year the primary focus of the realty business was to create a simplified and scalable structure through consolidation of all the group real estate undertakings under a single platform. Accordingly, the Company initiated the transfer of its realty business undertaking to LT Reality Properties, a wholly owned subsidiary through a slum sale under an approval approved NCLT Scheme of Arrangement. In addition, the realty business has also more than doubled its presales to rupees 94 billion in FY26 aided by successful launches in Noida and Panvel.
I come to ESG side of the company the company’s MSCI ESG rating was upgraded from BBB to to A in November 2025. The company was also ranked second among the top 200 environment firms globally in the 2025 list published by the New York based Engineering News Report. On the financing front, L and T became the first Indian corporate to issue an ESG bond under SEBI’s sustainability linked bond framework aligned with its commitments to water neutrality by 2035 and carbon neutrality by 2040. The company also secured a USD 700 million sustainability linked trade finance facility from a commercial bank with the pricing linked to key ESG KPIs including greenhouse gas emission intensity and freshwater withdrawal.
Now I will cover the financial highlights for FY26 on order inflows we had guided for a growth of 10% for FY26 at the start of the year. I’m pleased to share that we have significantly surpassed this guidance driven by strong order wins across multiple sectors. These include several ultra mega orders spanning hydrocarbon, onshore and offshore offshore wind, carbon light solutions, renewables and heavy civil infrastructure, reflecting the strength and diversity of our EPC projects portfolio. On the revenue front, growth for FY26 stood at 12% compared to our guidance of 15%.
The variance was primarily attributable to subdued execution progress in certain domestic projects, more particularly within the water and effluent treatment business, as well as delays arising from pending clearances on a few projects. In addition, progress on some domestic and international projects were also impacted in the month of March 26, which is typically a peak execution period for our business because of the disruptions arising from the West Asia conflict. We wish to inform that with respect to the water projects, we have seen an improvement in collections during Q4.
We are hopeful that this trend will sustain with the execution momentum improving as we move into FY27. Importantly, some of the previously delayed approvals and clearances are expected to come through, which should also support improved execution going forward on margins we had guided for an improvement of 20 basis points in FY26 through the first nine months of the year. We were tracking ahead of this guidance with P and m margins improving by 30 basis points. However, execution related disruptions during March had a short term impact on project performance which weighed on the margin.
Delivery in Q4 on our return on equity as of 31 March 2026 stood at 15.5% and declined by 80 basis points on a Y on Y basis. Please note that the return on equity includes an impact of 110 basis points arising from a one time provision. On account of changes in the Labor Code, we will now cover the various financial performance parameters for the quarter ended 31st March 2026. Order inflows in Q4FY26 stood at Rupees 898 billion broadly in line with Q4FY25 levels supported by healthy traction across both domestic and international markets.
With this sustained ordering momentum, our order book stands at Rupees 7.40 trillion as of March 2026, a 28% Y on my increase and providing us strong revenue visibility. The group revenues grew 11% y on y led by steady progress across major projects despite the impact of the West Asia situation. The projects and manufacturing Portfolio margin declined by 50 basis points y on y to 9.4% and is largely reflective of the change in the revenue mix. As of March 2026 the net working capital to revenue ratio improved sharply to 4.1% reflecting an improvement of 690 basis points y on y basis.
Our recurring PAT at Rupees 53 billion reported a growth of 5% y on y. The reported PAT for Q5FY26 is at Rupees 53 billion and and is down by 3% y and y as the previous year had an exceptional one off due to a part reversal of an earlier impairment provision. I now move on to individual performance parameters. During the quarter our group order inflows stood at rupees 898 billion, broadly in line with our previous year driven by the sustained traction in the international business within this our projects and manufacturing portfolio recorded an order inflow of rupees 699 billion, down 3% y and y.
During the current quarter, international orders accounted for 67% of the projects and manufacturing portfolio compared to 71% in the corresponding quarter of the previous year. Moving on to Prospects pipeline, Our prospects pipeline for FY27 is rupees 17.8 trillion as compared to rupees 19.02 trillion at the same time last year, Reflecting a decline of 6% of the total prospects pipeline of rupees 17.8 trillion rupees 9.1 trillion is domestic while rupees 8.7 trillion is international. I will provide the details of the prospects when I cover the Lakshya 31 since there are certain changes in the way our segments will start getting reported from the next financial year.
Moving on to Order Book the order book is at Rupees 7.40 trillion as of March 26, up by 20% vis a vis 3-25-28% vis a vis 3-25. In terms of composition, approximately 92% of our total board order book is from infrastructure and energy while in terms of geography 48% of the order book is from the domestic market while 52% from international markets. The breakdown of the domestic order book of rupees 3.58 trillion as of March 26 is as follows. Central government share is 9%, state government and local authorities 22%, public sector corporation or state owned enterprises at 30% and the private sector taking up 39%.
It is worth highlighting that the private sector share has risen meaningfully from 21% in March 25 to 39% in March 26, supported by strong traction in the thermal power sector, storage solutions, residential and commercial real estate, semiconductor fabrication facilities, data centers, solar EPC projects and emerging opportunities for building capacities in the ferrous and non ferrous space. Out of the international order book of rupees 3.82 trillion, around 78% is from Middle east and 22% is from the rest of the world.
With respect to additional details on our order book, around 9% of the total order book is funded via bilateral and multilateral agencies. As of March 2026, slow moving orders constitute roughly 1% of the overall order book and Rupees 170 billion worth of orders were deleted from the order book during the quarter. Further details are available in the accompanying presentation slides. Coming to Revenues Our Group revenues for Q4FY26 was Rupees 828 billion and registered a Y&Y growth of 11% with international revenues constituting 53% of the total group revenues during the quarter.
The revenue growth was mainly driven by high tech, manufacturing, energy and financial services segments, partly offset by subdued progress in the infrastructure segment. The revenue from the products and manufacturing business in Q4FY26 is rupees six hundred twenty eight billion, up 11% over the corresponding quarter of the previous year. Moving on to operating margin, our group level EBITDA margin excluding Other income for Q4FY26 is 10.4% as compared to 11% in Q4 of the previous year. The decline in EBITDA margin is largely reflective of the revenue mix as the previous year Q4 had higher revenue contribution from realty.
Also, the previous year margin included the TOD monetization gain in Hyderabad Metro. The EBITDA margin in the projects and manufacturing business for Q4FY26 is at 9.4% and has declined by 50 basis points from 9.9 in Q4FY25. Our recurring PAT for Q4FY26 is at Rupees 53 billion up by 5% on a YMY basis. The increase in recurring PAT is reflective of increase in the activity levels and treasury management partly offset by losses in carbon light solutions JVs. The reported PAT for Q4FY26 is at Rupees 53 billion down by 3% over Q4 of last year.
The Q4FY26 exceptional items including part reversal of Labor Code provision Q4FY25 represents the partial reversal of an earlier impairment the group performance. The P and L construct along with the reasons for major variances under the respective function heads is provided in the earnings presentation. You may go through the same for further details. Coming to working capital our NWC to sales ratio has improved from 11% in March 25 to 4.1% in March 26, mainly supported by higher customer advances and increased vendor credit.
Our group level collections excluding financial services for Q4FY26 is rupees 667 billion vis a vis rupees 682 billion in Q4 of the previous year. With continued focus on customer collections, our cash flow from operations excluding the financial services segment in Q4FY26 was at rupees 171 billion as compared to rupees 107 billion in in Q4FY25. Our group cash flows excluding financial services has been given in the annexures along with reported cash flows to enhance the clarity on the cash flow movement between the financial services and the rest of LT.
Finally, the trailing twelve month ROE for Q4FY26 is 15.5% vis a vis 16.3% in Q4FY25, a decline of 80 basis points for the year. The trailing twelve month ROE excluding the impact of the one time provision related to labor core stood at 16.6%. Very briefly, I will now comment on the performance of each business segment before we give our final comments on the outlook. We start with infrastructure. The infrastructure segment order inflow at rupees 435 billion grew by 26% in Q4FY26 on a Y on y basis aided by the receipt of an ultra mega order in the Middle East.
The order book of this Segment is at rupees 4.23 trillion as of March 2026. The book bill for infra is around 27 months. The revenue for the quarter was at rupees 397 billion, registering a growth of 2% Y on Y basis. The the subdued progress in the domestic and international projects led to the softer revenue growth. While pickup in revenue was anticipated for Q4, the execution was impacted by spillover effects of the West Asia conflict. Our EBITDA margin in the Segment improved to 8.8% in Q4FY26 vis 8% in Q4FY25 largely due to a favorable job mix.
Moving on to the next segment, energy projects which comprises hydrocarbon and carbon like solutions. The order inflows in the segment were robust at rupees 213 billion in Q4FY26 having a mix of both domestic and international projects as compared to rupees 322 billion order inflow in the previous year. The order book of this energy Segment is at Rupees 2.58 trillion as of March 26th with the Hydrocarbon Order Book at Rupees 1.95 trillion and the Carbon Light Solutions at Rupees 0.63 trillion. The Q4FY26 revenues for the segment was at Rupees 166 billion reflecting a strong 36% growth and underscoring execution progress on a large order book.
The energy Segment margin in Q4FY26 is at 6.5 as compared to 8.2 in the Q4 of the previous year. Cost overruns and closeout costs in legacy projects impacted the segment margin. As mentioned in the previous quarter, we expect the margin to improve the segment post a couple of quarters. Moving on to high tech manufacturing segment, this comprises the precision engineering systems and the heavy engineering businesses. The heavy engineering order in force benefited from nuclear equipment orders while the PES order inflows moderated due to deferrals.
The order book of the segment is rupees 353 billion as of March 26th with the PEs order booked at rupees 289 billion and the heavy engineering order booked at rupees 64 billion. The segment revenue at approx. Rupees 49 billion registered a robust growth of 45% Y&Y driven by execution ramp up in the large programs. In the PES business, heavy engineering revenue decline in Q4 is largely attributable to a modest order book. The heavy segment margin is largely reflective of the job mix. Moving on to the next segment which is the IT and the Technology Services segment which comprises our two listed subsidiaries LTM and L and T Technology Services including our newly incubated business of digital platforms and data centers and semiconductor design.
The revenues of this segment at Rupees 141 billion in Q4FY26 registered a growth of 13% y and y. The operational efficiencies in LTM and portfolio recalibration in LTTS drives the segment margin improvement. I will not dwell too much on this segment as both the companies in the segment are listed entities and the detailed fact sheets are available in the public domain. We move on to L and T Finance. Here again the detailed results are also available in the public domain. But briefly I will summarize.
The Q4 witnessed the highest ever quarterly retail disbursement and improved collection efficiencies as well as asset quality. The LNT Finance business has secured 98% retailization of its loan book as of March 2026. The ROAS remain healthy at 2.4% for Q4 FY26. Moving on to the Development project segment, this segment includes Hyderabad Metro and the power development business comprising of Nabapower. As mentioned earlier, LT has signed SPAs for the divestment of Hyderabad Metro and Navapur. Accordingly, the assets and liabilities of both these investments or these SPVs rather have been classified as held for sale in the financial statements for March 26.
We expect both the transactions to achieve closure this quarter, that is Q1 FY27. During the quarter, Hyderabad Metro reported a Net loss of rupees 1.79 billion in Q4FY26 vis a vis a net loss of rupees 0.07 billion in Q4 last year. The previous year included the TOD monetization gain of rupees 1.87 billion in Hyderabad Metro. Moving on to the other segment, this segment comprises reality walls, construction equipment, mining machinery, rubber processing machinery and the residual portion of smart world and communication business.
The segment revenue stood at rupees 16.9 billion 16.9 billion recording a decline of 29% Y&Y primarily to the lower handover of residential units in the realty business vis a vis the previous year which also weighed on the segment margin. Overall, I will now cover our strategic plan for the next five years starting FY27 ending FY31 termed as Alaksha 31 and as well conclude with the guidance for FY27. First is we will cover the Lakshya 26 the previous plan. So on the delivery side against an FY21 base, the company scaled meaningfully across two growth metrics, order inflow and revenue.
The order inflows increased from 1.7 trillion in FY21 to rupees 4.4 trillion in FY26 translating into a 20% CAGR visa be the planned 14%. The revenue grew from 1.4 trillion to rupees 2.9 trillion over the same period delivering a 16% CAGR reflecting consistent execution against the earlier estimated assumption of 15%. While Roe printed below the stated target, the progress achieved has been significant moving from around 10% at the start of the plan to 16.6% in FY26. While I say 16.6% this excludes the impact of the new labor codes in the current year.
This improvement demonstrates sustained momentum towards long term return objectives over the period. The performance was supported by by a series of deliberate strategy led actions Value accretive growth within the projects and manufacturing portfolio anchored in disciplined capital employment reflecting in a structurally higher roce the merger of L and T Infotech and mindtree to build scale and depth in technology and IT services. Successful progression of development project exists with the divestments of the Heidel asset, LNT infrastructure development projects, IDPL, NabaPower and Hyderabad Metro, thereby leaving no residual legacy assets in the portfolio.
Disciplined capital returns through a buyback and early investments to see future growth engines such as data centers, green energy and semiconductor design. Second, on the macro environment that a company expects to operate in the medium term, the domestic environment continues to be supported by a durable structural growth narrative with a GDP growth on a 6 to 7% trajectory driven by a sustained investment cycle across both physical and digital infrastructure. Against this backdrop, the opportunity sets remains expansive and multi year in nature spanning infrastructure creation, energy transition, defense and technology led services, energy security and energy transition are progressing in parallel spanning coal and nuclear on one hand and renewables, battery energy storage systems and grid infrastructure on the other.
The defence spending is increasingly driven by industrialization as the country seeks to build strategically independent platforms with a strong emphasis on modernization and innovation within the country. Private sector CAPEX remains selective for but is increasingly structural and sustainable with enterprises sharply focused on disciplined execution and return focus. In parallel, India’s emergence as a preferred global capability hub is reinforcing the GCC engine as enterprises continue to scale captive centers to access high quality talent and support transformation agendas in a cost competitive and resilient manner.
At a global level, the operating landscape is evolving amid geopolitical realignments and a measured retreat from open ended globalization towards trade architectures priority resilience over cost efficiency. The energy transition is accelerating as a strategic risk hedge rather than a pure economic choice while deeper AI adoption is driving productivity gains and reshaping the workforce. Against this backdrop the Middle east capex remains purposeful and resilience focused anchored in long term national priorities and diversification agendas.
Thirdly, the company has adopted its segmental reporting framework with the earlier projects and manufacturing structure being now formally redesignated as Projects, products and Manufacturing PP and M. The only material change is the segregation of the reality as a standalone reporting segment while all other businesses remain broadly comparable with selective internal realignments to sharpen the strategic focus. As part of this realignment the Company has consolidated its energy Green EPC business under a green energy reporting segment within the new PP and M.
The segment comprises renewables, earlier it was under infrastructure projects and offshore wind which was earlier forming part of hydrocarbons in the energy segment along with the onshore wind business, thereby unifying the group’s green energy EPC capabilities under a single segment. Separately, the development project segment, earlier comprising assets such as Navapower and Metro, has been repositioned towards green assets including operating green hydrogen and green ammonia production facilities under a boom framework for clarity.
While these projects are aligned with the energy transition theme, the development project segment remain outside of PP&M reflecting the fundamentally different capital structures, investment horizons and the asset ownership characteristics of these businesses. The construction equipment, industrial product design and development business which was earlier part of the other segment is now getting reported or will now get reported under the manufacturing and product segment. We have presented the historical data of revenue and margin for the last five years for ease of reference as part of the Lakshya 31 deck which is included in the Q4 earnings presentation.
I will now mention the order Prospects for FY27 and Comparative for FY26 under the new segment classification. As mentioned earlier, we have a total prospects pipeline of rupees 17.8 trillion for FY27 vis a vis rupees 19 trillion for which we had for FY26. The breakup of the prospects of pipeline is as follows Infrastructure utilities segment, the prospects pipeline is rupees 9.4 trillion for FY27 as compared to rupees 8.1 trillion for the previous year. Of the infrastructure pipeline for FY27, rupees 6.8 trillion is domestic while rupees 2.5 trillion is international.
The sub breakup of the various businesses within this infrastructure and utility segment is as follows. Transportation infra share is 23%, heavy civil infra share of 20%, power transmission distribution share at 18%, buildings and factories share at 17%, water effluent and treatment share at 16% and minerals and metals share at 6%. Coming on to the energy conventional segment, the prospects pipeline is rupees 5.4 trillion for FY27 vis a vis rupees 7.6 trillion in the same period last year. The prospects pipeline of rupees 5.34 trillion consists of hydrocarbon prospects of rupees 4.7 trillion and carbon like solution prospects pipeline of rupees 0.7 trillion.
83% of the hydrocarbon prospects pipeline is international while carbon light solution prospects are largely domestic. The energy green segment prospects pipeline is rupees 2.5 trillion for FY27 as compared to rupees 3.0 trillion in the previous period. The prospects pipeline of rupees 2.5 trillion consists of solar EPC pipeline of rupees 1.8 trillion and offshore wind pipeline of rupees 0.71 trillion. 78% of the solar EPC pipeline is international while offshore wind is completely international.
The manufacturing and product segment prospects pipeline is rupees 495 billion for FY27 vis a vis rupees 294 billion trillion sorry billion for FY26. I repeat the manufacturing and product segment Prospect pipeline is rupees 495 billion for FY27 as compared to rupees 294 billion for FY26. The FY27 pipeline comprises of heavy engineering projects of rupees 122 billion and the PE Systems pipeline of rupees 373 billion. Just to add the previous year had prospects of gas to power projects of rupees 0.6 trillion which we have not pursued and hence is not forming part of the FY27 prospects list.
Coming on to fourth on strategy and outcomes. Lakshya 2031 is structured around scaling and upgrading existing business while building selective future engines. In the projects business the priorities are margin stability, selective geographic diversification, private sector capex focus and technology led execution. The manufacturing and products portfolio is centered on advanced and complex engineering capabilities across the PES business forays into electronics, heavy engineering and construction and industrial products.
The defense business will be anchored on platform and system indigenization, strengthened through strategic partnerships and sustained investments in R and D&IP creation. The industrial electronics is being scaled through focused positions in robotics and automation, communication platforms and electronic system design and manufacturing, aligning the portfolio with structurally growing technology intensive end markets within heavy engineering priorities on deeper integration across the nuclear value chain while consolidating leadership in the oil and gas Segment Realty under Lakshya 31 the realty business is planned to scale through a disciplined strategy focused on land acquisitions or joint development, partnered integrated township development and selective expansion of the commercial portfolio.
The plan envisages reinforcing leadership by strengthening the brand’s position as the most trusted and preferred in the sector. In parallel, sustained focus will be placed on operational execution and governance standards to support listing readiness development projects as outlined earlier under the segment reporting change. The development project portfolio is being selectively reoriented towards asset ownership in the green hydrogen and green ammonia manufacturing facilities under a BOO framework leveraging L&T’s integrated end to end capabilities across the value chain.
Market participation will be calibrated and selective focusing on domestic and export opportunities supported by firm long term take or pay arrangements. The strategy is underpinned by strong strategic partnerships for investment and offtake alongside a disciplined focus on internal rate of return. I come to technology platforms and services under Lakshya 31 LTM aspires to double revenues over five years driven largely by organic growth and select inorganic moves while sustaining competitive mid teen operating margin and a more balanced resilient portfolio.
Under Laksha 31 LTTS is repositioning itself as a global engineering intelligence partner supported by deeper client relationship and sustained investments in talent, IP and AI driven delivery models. The Lakshya L31 targets 13 to 15% revenue CAGR growth over five years with EBIT margins of 16 to 17% reflecting a structurally stronger and higher quality growth profile in data centers. The objective is to scale the business where via hyperscale alliances, AI ready infrastructure and sovereign private cloud offerings.
In the semiconductor design, we will be focusing on strengthening our capabilities to cater to mobility, industrial and energy sectors. L and T Finance the focus of L and T Finance will be to deliver resilient growth with consistent returns, balancing scale up with prudence across the cycle. The strategy emphasizes disciplined portfolio expansion and strong risk management with targets of 20% plus loan book growth while maintaining credit costs below 2%. The financial outcomes under the plan are calibrated to deliver a 3 to 3.2% ROA and a 16 to 18% ROE.
Reinforcing sustainability of returns by scaling the franchise I come to capital allocation during the L31 period on capital allocation. Our approach is anchored around funding our long term growth plan while safeguarding returns, balance sheet strength and financial flexibility. Our capex strategy has a twofold objective. The first objective is to focus on strengthening the core business through capability upgrade automation initiatives and project related capex to enhance execution efficiency and competitiveness.
The second objective is directed towards selective seeding and scaling the future growth engine including data centers, green hydrogen, semiconductors and industrial electronics within the new business. Over the planned period, we envisage a capital outlay of approximately Rupees fifty billion towards industrial electronics Rupees thirty billion into the semiconductor business largely for the creation of proprietary IPs rupees 150 billion in green hydrogen where we are also actively evaluating options for strategic partnerships to optimize capital deployment and around rupees 100 billion towards the data center business.
It is important to note that for the data center business we are currently evaluating multiple business and partition mod. Accordingly, the pace and scale of investments may change depending on the final structure adopted. We are allocating almost rupees 44 billion for the realty business primarily to fund development of commercial real estate. In addition, the parent will provide near term support for land acquisition for upcoming residential or mixed use projects. Thereafter, the entity or the business may explore external fundraising options including debt and or equity.
Additionally, we plan to invest around Rupees fifty billion for upgradation of our existing hydrocarbon modular fabrication yard and the shipping facility. As part of our strategic plan, we are adopting a business specific leverage approach at L and T finance. Leverage will support growth in the green assets portfolio. The focus will be on project financing basis for reality and new businesses. Leverage will be aligned to the business model adopted. Overall, the returns to shareholders over the next five years will be a function of the cash flows generated by the PPM business and the timing scale of investments in the new growth areas.
I will now conclude with the guidance for FY27 and Lakshya 31. First, the guidance for FY27 order inflow on order inflows, our prospects pipeline of rupees 17.8 trillion for FY27 is providing a strong visibility. Based on this visibility and the opportunities we are pursuing, we expect the group order inflows to grow in the range of 10 to 12% in FY27 on revenue, we expect growth to be in the range of 10 to 12% for FY27. We do anticipate a softer first half primarily due to the current supply chain disruptions with a pickup happening in the second half as these constraints ease.
Encouragingly, we are already seeing improved momentum in the water projects with some payments coming through in March and in a few projects where starts were delayed due to pending clearances which have now been received on margins as referenced in the Lakshya Slide margin On the new segment structure, we will now present infrastructure and utilities, energy, conventional energy, green and manufacturing and products together under the Projects Products and Manufacturing overall portfolio P, P and M.
The key difference in this reclassification is that reality is excluded and being presented as a separate segment on this reclassified basis. The the FY26 margins for projects, products and manufacturing was 7.8% and we expect the same to be stable as well in FY27 as well. Coming to Working capital We closed the year at 4%, largely supported by customer advances received during the last quarter and a higher vendor credit. As these advances get progressively utilized, we do expect some normalization in working capital levels.
Accordingly, we are guiding the working capital to be around 10% in FY27, which remains well within our targeted range. Kindly note that this guidance that I provided for FY27 is basis our current expectation that there will be overall broad normalcy after Q1. We will revisit and update this guidance as required in July when We report our Q1 FY27 results. Concluding with the Lakshya guidance over the next five years, we are targeting order inflow growth at a CAGR return of 10 to 12%, revenue growth of 12 to 15% and a return on equity in the range of 16 to 17%.
The ROE guidance reckons in upfront investments into the newer business and platforms which we believe will begin to meaningfully scale and contribute to profitability in the later part of the planned horizon. With this, I conclude now we can get into Q and A.
Parikshit Kandpal — Analyst
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchstone phone. If you wish to remove yourself from the question queue, you may press STAR and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Your first question comes from the line of Mohit Kumar from ICICI Securities. Please go ahead.
Questions and Answers:
Mohit Kumar
Yeah, good evening, sir. And thanks for the opportunity and congratulations on a very strong ordering flow given the challenges. My first question is order book has grown by 19%, 22% and 28% last year. Of course I understand that the ward is on and it’s difficult to forecast in near term. But do you think that the revenue growth trajectory can improve materially once the geopolitical condition improves?
Parameswaran Ramakrishnan
Yeah. So as I said, we have given the revenue guidance of 10 to 12% for FY27 basis. The fact that the first six months will be subdued. Given the fact of the situation that is happening in the Middle east, we expect by the end of Q1 the conflict to subside and normalcy to get restored which will take another two months. So hopefully the second half of the FY27 will be a more busier second half. So we have factored this while giving the guidance of 10 to 12%. But as you see when I talked in the last part of my speech, I did say that we are taking ourselves a target of 12 to 15% revenue CAGR over the L31 plan.
So which means that obviously it also factors the fact that FY28 onwards revenue growth momentum should get stabilized assuming external condition, all other things remaining favorable.
Mohit Kumar
Understood. My second question is, since there has been a revenue miss in Q4, given that we were reasonably confident of meeting revenue guidance till Q3 and consequently looks like the margin improvement has not come through in this quarter, is it correct assessment and how much should attribute it to geopolitical situation?
Parameswaran Ramakrishnan
It’s a little difficult question, but okay, let me put it like this that on a broad basis we would have lost in terms of revenue almost 50 billion odd rupees in Q4 just on the course of supply chain issues that impacted both largely on the infrastructure side, the projects that we are executing in the Middle East. Power transmission, distribution and renewables. And as I mentioned in my speech, we have also had some slippages in the water segment. But these slippages in the water segment has been throughout the year.
So we did expect because the Jaljeevan mission program the purse strings were loosened sometime end of Q3 and we thought that we could be able to retrieve the lost ground. Unfortunately in that segment the execution has been a little patchy. So net net because of these three segments of sectors, Power transmission in Middle east, renewables in Middle east and water. I would say that the overall slippages in revenue will be in the range of almost 50 billion rupees for the.
Parikshit Kandpal
Mohit. Sir, does it answer your questions?
Mohit Kumar
Yes,
Parikshit Kandpal
Thank you. The next question comes from the line of Parikshit Kandapal from HDFC Securities. Please go ahead.
Aditya Mongia
Hi pr. Congratulations on a recent quarter. So my first question is I wanted to understand little bit more in detail on the risk buckets emanating from the Middle east starter book which is fixed guys in nature. So you know that. Your voice is breaking. Hello, can you hear me now? Is it better? Yeah, better.
Mohit Kumar
Better, Better.
Aditya Mongia
Yeah. I just wanted to understand a little bit more detail on the drifts which are currently emanating from the founder of the 665in nature. So. So that is in fixed price but commodity inflation then time and cost over and so how do we cover ourselves? So what kind of contractual provisions we have from the client side to compensate? Is there any postman clauses? So can you give some more color on all these things, especially on the risk side?
Mohit Kumar
Okay, Parakshit, this is Sharma here. Let me take this question. Firstly, I think instead of calling it as a risk asset that as I see it, there are more opportunities than risk at this point in time. Because all my interactions with major customers, I think they have laid down a major capital expenditure plan to expand capacities. So in fact we believe that in the subsequent quarters we will see many more prospects coming our way. I think the bid pipeline should only strengthen. So I think in terms of order inflow, I do not see that as a risk.
In fact it could be an upside. But what you say, what you talk about inflation and cost increase due to inflation. I think we have spoken about this before. Many of our contracts we have the ability, particularly on the infrastructure projects, we have provisions for price adjustments based on increases. And some of the energy projects, generally they are fixed lump sum. But I think customer is quite sympathetic with the situation and the preliminary discussions we had, they are very open to have a dialogue and I’m expecting that we should have some reasonable fair negotiations on that to compensate at least the cost if not anything else.
So overall I do not see that as a big risk and we’ll have to see how things unfold. But currently the environment is, I would put it as the overall positive.
Aditya Mongia
And so the bigger risk will be inflation according to you, or it will be supply chain risk because of the freedom of navigation being restricted.
Parikshit Kandpal
Sorry to interrupt. Your voice is again going like, you know, it’s not illegal. Is
Aditya Mongia
It? Is it better now? Hello.
Parikshit Kandpal
Yeah, better, better.
Aditya Mongia
So it’s supply chain. A bigger risk here on inflation is a bigger risk here. And also on the margins that you are carrying before the crisis began. So do you think that even currently you are well covered on those margins? Are you seeing any major disruptions there and only negotiation with the client can resolve that. So how do you attribute these factors on the margin
Mohit Kumar
The biggest risk is the supply chain but it is continuously getting better. I mean there are much better movements now between the GCC countries and and some alternate routes have opened up. Of course the cost is high and therefore we are sort of taking a very very measured approach. If the customer is agreeing to that increased cost of logistics because he wants to push the project and keep progress, then we are moving the material. Otherwise we are playing little bit of wait and watch game because we don’t want to incur the cost and then they depend on the negotiations.
So I think it’s a delicate balancing. That’s why PR said that in the first two quarters you may see a little bit of a slowdown on the revenue and depending on how much material we are able to move without incurring additional cost. But there are cases where customer is still very keen to proceed with the jobs and then is ready to compensate and then he we have no problem in moving the material.
Aditya Mongia
Okay, just last thing on the prospect pipeline sir, I mean this has declined this in your commentary earlier PR mentioned that. So in the current environment how the client taking decisions on how the capex will shape up for rest of the year given there is so much of uncertainty. So what is the commentary you are hearing in the customers? So what kind of is there any change in the CapEx outlook if new segments are so if you can give some more color how it is changing nature of CAPEX will change post this crisis?
Mohit Kumar
I mentioned it earlier, I think the capex narrative is quite positive. In fact you would have seen in the press also that in UAE they had a very major conference I think earlier this week where they announced major expansion plans and close to about $55 billion of capital outlay in the next three to four years. And they’re easing out a lot of local requirements and things like that because they want to push their capacity. I think same thing will happen in Kuwait and Qatar. So I think in the coming two or three quarters, maybe not two or three quarters, but in the next few quarters you will see a lot of projects getting announced.
Aditya Mongia
Okay, sure. Thank you. Those are my questions.
Parikshit Kandpal
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, we request you to limit yourselves to one question each per participant and rejoin the queue for any follow up questions. Our next question comes from Aditya Bhartia from Investec. Please go ahead.
Aditya Bhartia
Hi, good evening sir. While speaking about your long term order info guidance, you have indicated that you’ll be looking for selected geographical expansions. So just wanted to understand which geographies could we look at. Can Europe be a bigger opportunity for us after the 10Q order? If you can just highlight something around that.
Parameswaran Ramakrishnan
So okay, so it is like this. Over the last, I would say the L26 period apart from India and Middle east, we just set ourselves some amount of projects into the Central Asian republics. So we do expect the momentum to get strengthened soon. And then we have also set ourselves into the offshore wind segment which is more Europe segment. Okay. So we do believe that that part of the world can offer us more opportunities in select segment, not necessarily all the segment that LNT caters to. We are also planning as part of our tech initiatives, we are also looking to expand into EPC through modular systems, which means that we will try to reduce our site intensity which means we can in a way become geography agnostic by making maximum items in our fabrication shops either in India and Middle east and getting it shipped to the global destination.
So as a case thing we did for a urea plant in Australia, which is actually an EPC contract, but most part of it got modularly fabricated in our Chennai cartography and thereafter it was shipped and it was only some amount of local, I would say commissioning that rock that was done. So these kind of, I would say fabrication models also we are pursuing which will enable us to cater to a larger EPC universe instead of focusing with the traditional site based activity. And some newer geographies in offshore wind could also be apart from Europe can be also Korea and Taiwan.
Hopefully I think some opportunities also shaping up. So these are places where renewables in
Mohit Kumar
Indonesia,
Parameswaran Ramakrishnan
Renewables in Southeast Asia as well.
Aditya Bhartia
Sure sir. And you hinted at some conversations that are happening with customer in respect of cost compensation. In the past have we seen this level of increase in raw material prices ever and customers in the Middle east being okay to kind of enter into negotiations. I just want to understand what have our experiences been and how the scenario played out during such disruptions. Let’s say during even Covid.
Mohit Kumar
Yeah, I mean in the past also we had maybe not in the short period of time we did not have so much of increase because oil prices have gone up quite a bit. But there has been similar situations and customer response has been I would say quite reasonable. I mean I think and even the current dialogue and Discussions we are having, they seem to be quite receptive.
Aditya Bhartia
Sure sir, thank you so much.
Parikshit Kandpal
Thank you. The next question comes from Amit Anwani from PL Capital. Please go ahead.
Mohit Kumar
Hi sir. Thank you. Thanks for taking my question. So first question on the Middle east, the 40% book exposure which we have amid this war, has the duration increased and what is the current duration of that Middle east book which is roughly about 3 lakh crore. And second, in terms of projects including offshore hydrocarbon, onshore, hydrocarbon and renewable, what is the mix and which portion actually is seeing the major impact in the Middle East? This is your current assessment there.
Parameswaran Ramakrishnan
What was the first question? The
Mohit Kumar
The duration of the Middle east order book,
Parameswaran Ramakrishnan
The duration of the jobs in Middle east would have gone up. Is it. He wants us to know. I mean not really. I mean see most of the projects what we have
Mohit Kumar
In the. Let’s put it at. I mean I think. Let’s recap. I think we have majority of our projects are in hydrocarbon onshore, offshore and on the renewable space. Right? I mean in terms of value now in renewable space, our track record in the past has been that we have been finishing these jobs ahead of time and at least two to three months ahead of time. And so I think even if you assume that these 23 months are lost because of this disruption, we will still be able to finish the projects on time if not earlier.
So I do not expect any delay when it comes to hydrocarbon onshore where we are today with respect to the project which are currently under execution, either they are in a very early phase of engineering and procurement or they are in the later phase of construction there the material delivery and logistic challenges are not going to impact significantly the overall duration. And I think the offshore except one project where we are scheduled to move some of the stuff from our yard in Oman to the work site which is held up.
Rest of the projects are again moving reasonably. Okay. But this is also a long gestation project. It’s the completion is sometime in 28 second half. So we have adequate time to recoup even if there is some dislocation. So overall I do not see that there is going to be a major extension in the, in the project portfolio. So that’s the first one. What was the second one? I think, I think it covers also the second. Yeah, yeah.
Aditya Bhartia
I think I just wanted to also understand in terms of you mentioned about shipping and logistics cost going up. So any basis point impact or increase in the these costs you must have seen in this two months. If you could Highlight that also
Mohit Kumar
We said now we are also very carefully calibrating that we are not going ahead and incurring the cost unless the customer is ready to reimburse and otherwise we are kind of slowing down and we will move the material when the cost comes down. It is coming already coming down. It used to be $8,000 per container. Now it has come down to 5,000 and maybe it will come down further even as the time progresses. Amit,
Parameswaran Ramakrishnan
I did mention that the logistic costs have gone up and insurance costs gone up. But I also told that we are on active discussions with the customer to ensure that these cost increases. How we are able to pass it down to the same so discussion the clients are happening at a very very intense level in terms of the overall project timelines, the tendering. The client and the customer also understands that. So. So we don’t think at this juncture it is premature to comment about any impact per se.
Mohit Kumar
Right. Second on the Lakshya plan, whatever growth we are building in if possible for you to highlight since we’re getting into a lot of focused areas and you said we’ll be scaling up there. So what is the infra versus non infra growth built up which is happening and same I think if it would be better to understand the ppm margin of 7.8% how that will increase
Aditya Bhartia
If I recollect you said 7.8 will be 7.8 this year also how that will pan out in the Lakshya plan. So any understanding on these two will be helpful.
Parameswaran Ramakrishnan
So Amit, let me put it like this that we have given the guidance is on the return on equity. Return on equity is a factor of how much are we ensuring the the overall improvement in the numerator which is profitability and also how much of investments that is the denominator part. So all of these things are a function of that. In fact in L26 plan also we only focused on the return of the target because on a five year horizon to talk about a margin I think is a little difficult especially for our business of ppm.
Okay. So I guess we will stay put with that number. And what is the first question that you asked the PPM margin guidance of 7.8 what are
Mohit Kumar
The revenue non intraversive infra how the growth this
Parameswaran Ramakrishnan
Is being done at the overall level. So I think we will stay at the group level at this juncture. Each year we will give the breakup possibly between the relevant businesses. But at this juncture I think we will keep it at a group level. The Revenue, momentum, market.
Mohit Kumar
And sir, lastly if I may, on the data center you Talked about some 10,000 crore capex towards that business. And so if I may understand, are we going to target you? You talked about some technology types you’re exploring on that the partners is it? That will be the EPC will be doing EPC also and will be operator also leaving these data centers. And what exactly
Aditya Bhartia
Would be the kind of target we are looking for during this Lakshya plan in terms of megawatt of data centers. If you can get some color.
Mohit Kumar
Thank you. Ramanir. Let me answer this. In terms of data centers there are two distinct business models that are possible. One is the where you develop a sophisticated commercial real estate and based on tenancy you collect your yields. That’s one kind of data center business. We are not excited about that. What we want to do is make sure our Data center is AI enabled. Which means that we will have servers and GPUs which will enable high computing to be done. And for which obviously global hyperscalers would be be one client set.
But there are also quantum computing organizations which would be another client set. At the moment the thinking is that about 200 megawatts worth of data center capacity we could create over time. And as you might know, initially we have created 30 megawatts. And another 30 megawatts is under construction in Mape. The first 30 is in Kanchipuram in Chennai. Our idea is between Hyderabad, I’m sorry, Vizag, Bangalore and Mumbai. We should be able to put together this 200 megawatt capacity. But that will come in modules.
The effort would be to see whether we can do some build to suit. Meaning that we have an arrangement with both the servers, chip supplier, GP supplier as well as the end user. And MOU that we have with Nvidia is precisely towards that. That once we assure a certain capacity being created and of the type that would interest certain large organizations then it also goes into the market and generate now what returns they would give. It’s little speculative at the moment because the cost of setting up the data center and how you populate the data center will derive the returns.
Our guess is it should be able to give about 13 14% return at an optimal level which will have combination of hyperscalers and non hyperscalers. But we’ll have to figure out as we go along. At the moment we are trying to curate the market, develop supply chain and also create facility from the ground up. That’s the thinking. Maybe the full benefit of these investments will grow in 31 36.
Aditya Bhartia
Thank you so much sir. Thank you so much. All the best.
Parikshit Kandpal
Thank you. Participants are requested to limit their questions to one each per participant. The next question comes from Sumit Kishore from Access Capital. Please go ahead.
Mohit Kumar
Good evening. Thanks for the opportunity. Congratulations to PR on elevation of role to cfo. My first question is the only question is that projects, products and manufacturing margins have been range bound between 7.7 to 7.8% for the last three years. The guidance again is 7.8% over this period. If I look at the segmental breakup energy conventional margins have been coming off sequentially from FY24 to 26 and all other segments have seen improvement. You have been calling out that the hydrocarbon sub segment has been a drag on the energy segment margins and there are unexecuted legacy order book here.
So how large is this unexecuted legacy order book and are the ultra mega orders that you have booked in this segment, aren’t those going to sort of drive margin improvement going forward or would they have a long gestation period, an initial period of execution which is why you are guiding to stable margins. Because our thought process I think was the 2/4 down the line will have margin improvement in energy segment. So slightly long question but I think it’s very important to understand your thank you.
Parameswaran Ramakrishnan
Okay Sumit, thank you. And while I was covering the energy segment okay I made a specific mention and this energy segment margin movement softness has been discussed in the previous call also and I’ve been telling you that we have had certain legacy projects which are at their terminal stages of completion and most of these projects have got completed. They have been almost in the work job handing over to the client and what will be left out is what we call technically the defense liability period.
So we believe so far as the hydrocarbon is concerned those projects have got completed and we should not see any further cost creeps happening from those because the projects have been handed over. And I did talk about in the call today that we expect the segment margins to move this up as we get into the newer projects that are under execution. But it is also important for me to say that this is all a status update as a particular point of time and when we gave the guidance that stable what we are talked for FY27 we are told it’s a stable guidance.
Okay. I did refer the fact as to the the Q1 and Q2 considering that the execution momentum could be a little software softer because of the situation in Middle east impacting both supply chain into Middle east and also possibly even the local projects. So this has been factored into that. The momentum of execution being a little softer in H1FY27 while we are guiding a stable margin profile for FY27.
Mohit Kumar
Sure. So as the situation normalizes, the normalized run rate of EPM margins will not be stuck at 7.7, 7.8%. There might be an improvement.
Parameswaran Ramakrishnan
I am only giving you stable margins for FY27. I don’t want to give a number because as you know this is a portfolio of jobs. There are some jobs which do well, there are some jobs which have little, can be a little. I would say challenges could be there. But having said this, we have communicated that energy margins went down because of the projects. Those projects have got closed and hopefully, logically speaking, the margin should be improving in that segment in the coming quarters.
Aditya Mongia
My only worry is that the ultra mega stage of execution should not or if it becomes an impediment to margin improvement in this segment 2/4 down the line because those orders will be at early stage of execution.
Mohit Kumar
No, we do not see, we do not investigate anything of that sort at this point in time.
Aditya Mongia
Thank you so much sir. Thank you. All the best. Thank you.
Mohit Kumar
Also working on recovering some of the cost which you incurred with customers and that will also. On the
Parameswaran Ramakrishnan
Earlier
Mohit Kumar
Jobs. On the earlier jobs. So. But since we cannot
Parameswaran Ramakrishnan
Account as and when they get crystallized, it may can come directly as a margin. But time will tell. Thank you.
Parikshit Kandpal
Thank you. Your next question comes from the line of atul Tiwari from JPMorgan. Please go ahead.
Mohit Kumar
Yes sir. Could you give some more details about your foray into electronic manufacturing services in terms of how big the capex will be and what are the timelines and any other details in terms of customers or this product segment you will enter into.
Parameswaran Ramakrishnan
So I did indicate that we are setting a number of around 50 billion rupees as capex for this particular business. It is essentially going to be industrial and defense related electronics. In fact, our PES business already has a small amount of what, what we call defense related electronic business that is being taken out and put in this overall electronics part. So the capital investment outlay in this plan is As I said, 50 billion rupees or 5000 crores which will be incurred over a period of time.
But essentially it will cater to industrial automation, robotics automation, those, the electronic components that are inputs for these kind of, I would say say industrial applications is what we are targeting. We are not looking at consumer B2C segment in this particular space today.
Mohit Kumar
Okay. And sir, what is the update on your bid for Ankara development and medium altitude long endurance platform as well?
Parameswaran Ramakrishnan
I think what we mentioned in the AMCA during the January call, I think the status update continues to remain the same. Apart from us, there is one more counterparty who have been, I would say are there in the fray. Let us see. We are not. We don’t have much further to say beyond what we stated in January.
Mohit Kumar
Thanks.
Parikshit Kandpal
Thank you. The next question comes from the line of Puneet Gulati from hsbc. Please go ahead.
Mohit Kumar
Thank you so much and congrats for your elevation. My question is first on the revenue line where you talk about 12 to 15% revenue. How much of it could be driven by your existing business and how much do you think the new businesses should drive?
Parameswaran Ramakrishnan
I would say 12 to 15. You’re referring to the the CAGR that we have put in L31 mostly would be from the existing businesses. So growth okay
Mohit Kumar
On the ROE also your previous target was 18%. This time you restricted to 16 to 17%. How should one think about that?
Parameswaran Ramakrishnan
So Puneet, last time 10 to 18 when we gave that guidance was on the basis of I would say the concession projects completely off. In fact Hyderabad Metro was to be off in 2324 itself during the plan, but it’s happening in 2627. Okay.
Mohit Kumar
Yeah.
Parameswaran Ramakrishnan
We also had a option of the margin improvement and also the working capital intensity. We factored the buyback and we did not have that much of capital intensity in the last plan insofar as this time is concerned. So when I’m giving the guidance of 16 to 17, if you just add up the numbers of the investment that we are talking about, be it electronics, be it green energy, be it in data center, these businesses know in response to the earlier question that 12 to 15% revenue growth is all coming from what you call largely PPM and ITTS portfolio.
These large investments, most of them will be in the investment phase and maybe at the end of the plan they may actually getting into revenue generation phase. So we have factored all of this while giving the RoE targets of 16 to 17.
Aditya Mongia
So the only one
Parameswaran Ramakrishnan
Aspect I would like to specifically mention is in a way L26 every item. Because what we mentioned was the profitable return accretive growth in P and M. And that is what if you see in our presentation at the end we also given the return ratios of the various businesses. If you see the return ratios of the P and M from FY22 to 26, it has more than doubled so although the margins could have moved southward, but the return ratios have gone up because we have taken on the back of profitable growth or stable profitable growth at lower capital intensity and hence improving the return thresholds.
And what we stated as buyback was also one second was the complete projects on the concessions portfolio. Of course it took time but as we speak now, that part of the portfolio is now virtually done and dusted.
Mohit Kumar
Understood? That’s very clear. That’s all from my sir. Thank you so much and all the best.
Parikshit Kandpal
Thank you. The next question comes from the line of Priyankar Bespas from GM Financial. Please go ahead.
Mohit Kumar
Thank you for the opportunity and of course Congratulations to you PR. My first question is for the 10 to 12% growth that you have guided in the Laksha plan that is still FY31. So if you can elaborate a bit what sort of growth you are making into a plan from Middle east and let’s say from the other regions because of geographical diversification.
Parameswaran Ramakrishnan
Okay. So Painter today, structurally speaking, if you see the old ppm, old PNM or the new PPM business excluding realty, I think the way we have been seeing the last three years is technically order info are 50 to 50, 50% domestic, 50 to 50 international. It is primarily because that given LNT size, I don’t think just working on India would suffice. And we have expanded our credentials, rightly we expanded our credentials, our competency bandwidth into multiple segments. And now we are considered as one of the top notch EPC contractors in Middle east for a variety of segments.
And we do expect that apart from the primary geography of India, the next important geographies are Middle east and some parts of Europe and I think talked about Indonesia for renewables and maybe offshore wind for Korea, Taiwan, apart from Europe, all these things are going to I think be a sustainable order prospects geographies for us. So given this kind of little more expensive geography, I think it would be at this juncture, I don’t have a number per se, but what we can talk is 50 50, that order inflow intensity between domestic and international may continue and
Mohit Kumar
The new new business, new geographies may contribute
Parameswaran Ramakrishnan
5% but the international 5050 would be, I think you can assume this probability to continue that way.
Mohit Kumar
So would it be fair that Middle east would actually continue based on what Sarma said also highlighted our Middle Eastern prospects that the growth that had happened, we have
Aditya Bhartia
Seen like strong growth in the Middle east. So that should continue during the planned period. Would it be a right thing to assess?
Mohit Kumar
Yeah, Middle east will continue to be our core market. I mean for us to provide that kind of growth we cannot provide without Middle East. So it will remain and we are very optimistic about that region.
Operator
So that’s very helpful. So Middle east can still deliver, let’s say a double digit type. And finally one more thing
Mohit Kumar
Like if you can elaborate on your real estate plans. So you had already achieved, if I heard it right, 94 billion in pre sales in FY26. Right. By FY31 let’s say in the Laksha plan. What sort of scale for lnt reality that you see both in terms of sales
Parikshit Kandpal
And let’s say presales.
Mohit Kumar
See Shankaran here. The plans we are currently pursuing is about 100 million square feet between residential and commercial. The plan is about 70% will be residential, 30% will be commercial. The commercial will provide me the annuity cash flows to sustain quarters when you don’t have ramp up of residential.
Parikshit Kandpal
Insofar
Mohit Kumar
As residential is concerned, there are two calls we have taken. One is to position ourselves as a premium housing provider. So we will not get into this mid sized mid scale housing complexes. We will get into larger and within that we will try to get into township kind of situations rather than single buildings. And we have also decided that there are a few markets where return per square feet is the highest. For example Mumbai is one such, NCR is another. So maybe our focus would be in markets where the return ratios are superior as compared to more subdued market like maybe Hyderabad for example.
So the approach is that as we find opportunities we’ll also have to find capital because this is a capital intensive active. Much of the land that LT currently owns have been in the monetization mode for the last few years. So looking forward, by the time Lakshya 31 ends I don’t think we will be left with much land out of L&T’s bank. So it has to be land acquired at current prices and sold at current prices post development. That would mean the capital cost will have to be frequent and consistent.
One of the reasons why we are restructuring the reality business is at some point in time to enable the company like financial services to be market facing. The access to capital would be determined by the opportunities in those select markets and for the type of development I spoke to you about. So it would be fair to say that this 100 million square feet that we are currently sitting about 60, 65 is both completed and under active development. So really futuristically we are looking another 30 million square feet now over the next five years.
We possibly might look at another 100 million square feet. I think that would possibly peak our execution capacity as well as balance sheet exposure.
Parameswaran Ramakrishnan
Just to add one more that CAGR growth in pre sales is over the L31 is around 25% is assumed in reality.
Mohit Kumar
So this is a sales or a pre sales kegger. You are saying 25 percentage
Parameswaran Ramakrishnan
Growth. I said pre sales
Mohit Kumar
Or pre sales. Okay, if I may just squeeze just one more in. Just can you just give let’s say the capex number that you plan for FY27. So just try to model out the intensity over the years. So at least what should be a ballpark number for FY27.
Parameswaran Ramakrishnan
So you can take electronics at 10 billion crore. The normal projects part of our capex we can take around 25 billion. 25 billion. You take 25 billion as CapEx for the core PPNM business. Okay. And 10 billion for the, for the electronics part of the business data center we can take maybe around another 10 billion rupees. No, it can be more than that. So you can be a little around 20 billion rupees as the spend for the current year.
Mohit Kumar
Okay sir, that’s broadly from my side. Thank you so much.
Parikshit Kandpal
Thank you. The next question comes from the line of Mitish Shah from ICICI Securities. Please go ahead.
Unidentified Participant
Yes, thank you so much for taking my question. So in the last quarter we mentioned that out of the five airlines that we had in void four had been cancelled and one was going ahead and rekindling was expected in. What is the status of those projects in Kuwait?
Mohit Kumar
Kuwait I think Kuwait. Okay, so n on Kuwait. Like we said out of the four three were cancelled and we are hoping one will survive. And the good news is that as we know it has survived. I think it has been going through the approval process and the project will go ahead and it is under approval of various stakeholders.
Unidentified Participant
Do we have any update on the retailing? I mean I know it is early days considering
Mohit Kumar
The conflict but are you hearing
Unidentified Participant
Anything
Mohit Kumar
Re entering will happen during this year? Thank you.
Parikshit Kandpal
Thank you. The next question comes from the line of Renu Ved Pugalia from IIFL Capital. Please go ahead.
Renu Baid
Yeah. Hi, good evening team. Thanks for the opportunity. One question was wanting to understand why they have outlined 50 billion capex for the overall electronics portfolio in the last. In the current month or earlier? Last month. Month. You’ve already commissioned the factory in Coimbatore and also wanted to understand here is does your five year capex include any investment in the supply chain and the ecosystem for electronics segments like OSAT etc or it will be purely EMS focused investment that is outlined of 5000 crores.
Parameswaran Ramakrishnan
Nothing on OSAT Renu, it is all on the traditional electronics only
Renu Baid
Targeting EV solar inverter kind of solutions that you’ve already robotics and
Parameswaran Ramakrishnan
All that.
Renu Baid
And secondly going through and listening to whatever we have discussed so far it clearly looks that the share of manufacturing across your various segments including EPC when you’re looking at international with a modular approach will see significant increase in the share. So would it be right to that while some of the newer areas or emerging segments are in capital intensive mode and hence will optically depress your ROEs over a five year period but the core portfolio which we are running through should definitely be increasing 18, 20% plus ROE along with the growth and margin expansion that we are gunning at.
Parameswaran Ramakrishnan
That’s a fair assumption we can make today.
Renu Baid
Project. That’s it. Thank you so much and best wishes team
Mohit Kumar
And it
Renu Baid
Was always a pleasure interacting with you RSR all these years and yes we are welcome and best wish to share your role.
Mohit Kumar
I’m going nowhere. I am in the company for two more years so you can have the pleasure of interacting with you. Thank you.
Renu Baid
Thank you.
Parikshit Kandpal
Thank you. The next question comes from the line of Aditya Mongia from KO Securities. Please go ahead.
Mohit Kumar
Yeah, thank you for the opportunity. I think two questions from my side. The first question more on reconstruction Capex as you see through, as in you have a certain tan that you have for overseas. Is it already factoring in some part of reconstruction capex or what are customers actually see linked up to this? Any thoughts on keep it finger
Aditya Bhartia
On whether we’ll participate over there.
Mohit Kumar
That’s
Aditya Bhartia
The first question
Mohit Kumar
On the reconstruction or reinstatement whatever you call it. I mean I think the numbers are still very fluid at this stage and because there’s a good amount of assessment happening, some amount of repairing work is already happening. But from what I have gathered the number can be anything between 30 and $50 billion over the next three years. That’s what is being assessed but very difficult to sort of put a finger on it and to tell you honestly but it is in that range.
Aditya Mongia
Understood. Just a last question from my side. When you think through the investments beyond epc,
Mohit Kumar
Is it more to do with the fact that we want to be in a certain roe range of 15, 17% and then a 50,000 crore number pops up and then we divide it across buckets? Is that a constraint? So what we are trying to say is that the numbers that you Kind of gave us give to us in terms of investments beyond apc,
Aditya Mongia
Yeah, Hydrogen,
Mohit Kumar
Semiconductors, so on, so forth. Is the thought first process more bottom up in the sense of where do we want to be five years from now or is it constrained by us being a certain
Aditya Mongia
15, 17% ROE band and thus we have only as much to invest for the next five years? I’m just trying to say how much clear line of sight does the company have and is the balance sheet a constraint?
Mohit Kumar
See, balance sheet is not. Balance sheet is not a constraint. I think first and foremost we want to be future ready. We do believe that the businesses that we are currently in will continue to have strong momentum going forward, at least in the context of next five years. So we want to use that phase to create alternate streams of revenue and cash flow. And to do that we need to chalk out certain investment. If the company requires capital and given the fact we have such a credible track record in the financial markets, we should be able to go out and raise capital.
That is the. But what we are all the while worried is responsibility for returning value on the capital. Just because capital is available. We don’t want to just cat it around. We just want to make sure that the investments are measured and we keep the risk adjusted return in view all the time for your sake.
Aditya Mongia
Got that? Thanks a lot for response to those questions.
Parikshit Kandpal
Thank you. Your next question comes from the line of Bharani Dar Vijay Kumar from mit. Please go ahead.
Mohit Kumar
Yeah, good evening. Am I audible?
Parameswaran Ramakrishnan
Yes. Yes.
Mohit Kumar
Yeah. Okay. Congrats. First of all to pr. My first question is on Qatar. So we know that the world’s largest LNG facility has been impacted and likely to be repaired. So when you mentioned this 30 to 50 billion
Aditya Bhartia
Of repairing or reconstruction opportunity in the next three years, are you considering this as well and do we have a role to play in this gas projects also
Mohit Kumar
Like I said, I don’t have a breakdown by country, by project because it is that kind of information is not available. It is that 30 to 50 billion dollars for my judgment or my assessment is based on my discussion with various senior executives and it does include the LNG train also two trains are affected in that currently we do not have any much role to play because it is all go back to the people who built it earlier. So. But what it will do is that you know, it will keep some of my competition busy and that it will provide me a better opportunity for the other bits where I’m not involved.
Aditya Bhartia
Okay, great. Second question is on the areas like semiconductors and Data centers like 10,000 crore of investment in data center indicate incremental 200 megawatt of data center capacity. We initially had 100 megawatts. So is that the right understanding that we are doubling our expectation?
Mohit Kumar
No, no, no. The understanding about doubling expectations. Right. Because we need to scale to be able to attract the type of clients we want to cater to. We need to have scale. But the linkage of 10,000 crores to 200 megawatts is not linear because it depends on the type of data center that we want to put up, etc. It can vary anywhere between 35 crores per megawatt to 350 crores per megawatt depending on how you want to populate it. So at the moment what we are trying to pursue is this. But the configuration of 200 gigawatts megawatts will actually evolve as we go along.
Aditya Bhartia
Sure. Even similarly on semiconductor we had through the Fujitsu JV and silicon systems plan to do design rather than fabrication. So the new capex of around 5,000 or 3,000 crores you mentioned, is it on similar lines or anything more in fabrication or new that we are planning?
Mohit Kumar
No, no, it is. It is largely towards acquisition of IP wherever there are white spaces plus creation of lab facilities. So it is not getting into fabrication or.
Aditya Bhartia
Okay. And my final question is on the domestic execution. So one month has passed in this financial year
Mohit Kumar
And I think there would be impact due to the supply chain cost, labor, even on domestic executions. Have you so your thoughts on that?
Parameswaran Ramakrishnan
I have. When I gave you the guidance, when I have given the guidance for FY27, I did mention in my. In my script saying that Q1, Q2 will have an impact mostly from Middle east, but domestic also there will be some impact because of supply chain.
Mohit Kumar
Sure. Understood. All the best and thank you so much.
Parikshit Kandpal
Thank you. Thank you. The next question comes from the line of Amit Mahavar from ubs. Please go ahead.
Mohit Kumar
Yeah. Hi sir. First of all, congratulations on managing the risk pretty well with the variable ps in last 2, 3 years, particularly in Middle East. Particularly. I just want to understand, do you think in the next six to 12 months conditions on infra versus energy project in Middle east are going to be very divergent and you see a lot of rebate and reissue of infra tenders or reworking of infra tenders. So you think that is unlikely? I just want to understand the risk profile of the infra book we have is a very energy
Aditya Bhartia
Book. I’m very comfortable with the energy book. But if you can help us on the infra order booking, sir?
Mohit Kumar
Well, the infra projects are also coming up. I mean essential. We are at the essential infra space. We are not in the resorts and hotels and things like that. And those essential infra projects will go ahead definitely in Saudi, definitely in UAE and I think the rail transport network will expand so we remain, I think if at all, I mean in this crisis after of course this disruption for the next few months, post that disruption, I think generally there will be more investment and more prospects. That’s the way I.
That’s the impression I carry.
Aditya Bhartia
True. And a quick one sir, if you talk to Saipem, Samsung in Europe and Korea etc. They’re all looking at rebuild opportunities in Iran. Also do you think the availability of manpower in the next six to 12 months is going to be difficult and expensive? Any color on manpower. So that’s it. Thank you.
Mohit Kumar
Yeah, manpower continues to be a challenge even in India. Right. So I think that we are looking. That’s why we have put laid down in our Laksha31 technology enabled, execute, cancel. We’ll look at opportunities to see how we can do more automation. We have done a lot actually in this space and we’ll continue to work on that to see how we can improve productivity by using latest technology and automation and reduce our dependency on manpower. Having said that, I mean it’s not going to be replaced.
It will be only reduced and also look at modular solutions. So doing it at the place where we have access to workplace. So combination of interventions will have to be used to overcome that challenge.
Aditya Mongia
Thank you very much.
Mohit Kumar
Thank you.
Parikshit Kandpal
Thank you ladies and gentlemen, as there are no further questions I now hand the conference over to Mr. P. Ramakrishnan for closing comments.
Parameswaran Ramakrishnan
So thank you ladies and gentlemen, for the patient listening, I hope all the queries. We have been able to articulate our FY26, FY27 and L31 story quite properly. Thanks for your time and once again good night. Thank you.
Parikshit Kandpal
Thank you on behalf of Larsen and Tubro Ltd. That concludes this conference. Thank you everyone for joining us and you may now disconnect your lines. Thank you.