L&T Seeks to Reassure Investors Over Middle East Pressures

Larsen & Toubro (L&T) Reports Minimal Impact from Middle East Tensions

Key Figures:

• 95 of 100 sites in the region remain operational
• 5 sites have been shut down due to safety concerns or client suspensions
• 37% of L&T's orders come from the Middle East

Company Overview: Larsen & Toubro, India's largest engineering firm, has a significant presence in the Middle East with a substantial order book in countries such as Saudi Arabia, UAE, Bahrain, Oman, and Qatar. The company has been in the Middle East market for over three decades and has diversified its portfolio to mitigate geopolitical risks.

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Response to Hostilities: L&T's deputy managing director and president, Subramanian Sarma, stated that the company had prepared for geopolitical eventualities and has taken a calibrated response to the ongoing crisis. The company has activated a contingency management group to monitor the situation and ensure business continuity.

Supply Chain Disruptions: Sarma acknowledged that shipping difficulties in the region, including the closure of the Strait of Hormuz, are impacting shipping in the region. However, local logistics networks remain operational, and supplies from within the region are not affected.

Order Book and Revenue: The company received around 37% of all orders from the Middle East, with revenue contribution towards the group's topline being in a similar range. L&T has multiple large contracts with fossil fuel firms and parastatals such as Saudi Aramco.

Financial Performance: Sarma stated that collections have largely been on track, and have been better than expected, with regular payments through operational banking channels. The company has been able to pass on costs to customers during various force majeure events, such as the COVID-19 pandemic.

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Stock Performance: L&T's stock has declined by 22% over the past month due to concerns about the impact of the war on the company's ability to complete margin-sensitive projects on time, affecting its balance sheet.