- L&T faces disruptions from Middle East conflict and Strait of Hormuz closure impacting shipping routes
- About 95% of L&T's regional sites operate normally; 5% near military bases are suspended or disrupted
- Supply chain delays occur as materials from China and Europe stall in shipping channels
One of India's biggest companies, Larsen & Toubro Ltd. is facing the heat from the ongoing conflict in the Middle East involving Iran and the subsequent closure of an important trade route - the Strait of Hormuz. This has led to a shipping route clog and, invariably, a gas supply shortage.
Speaking to NDTV Profit, L&T's Deputy Managing Director and President, Subramanian Sarma, said that while the Middle East remains the company's second home, the emerging conflict is forcing a rapid pivot in how the company moves its gear.
As things stand, about 95% of L&T's 100 regional sites are operating as business as usual. However, the remaining 5% - sites that are primarily located near military bases - have been either suspended or disrupted. The bigger headache is the supply chain: materials from China and Europe are stalling in shipping channels, and new material is not being lifted.
Sarma says L&T has a two-to-three-month window to find alternative transport modes or discharge points as current routes become untenable.
ALSO READ: L&T Target Price Cut: Middle East Woes May Weigh On Order Wins, Revenue, Says UBS
The stakes are quite high for L&T, considering the fact that approximately 60-70% of India business' gas needs are sourced from the Middle East, and the company is already feeling the pressure of supply shortages.
The bottlenecks come as L&T international orderbook remains heavily concentrated, with 80% of it being centred in the Middle East, primarily in Saudi Arabia and the UAE. Saudi Arabia alone accounted for 24% of the company's FY25 revenue.
Amid all the chaos, Sarma added that invoice collections have been quite strong. Investors, however, remain jittery with the L&T stock falling as much as 20% since the onset of the war. Looking past the immediate conflict, the company is betting on a "green" future, eyeing opportunities in green hydrogen, coal gasification, and renewable projects in Indonesia.
ALSO READ: L&T Reassures Markets: 95% Of Middle East Sites Reporting 'Business As Usual'
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