- Larsen & Toubro reports 95% of its Middle East sites operate without war impact
- 5% of sites near military bases are suspended due to safety or customer requests
- India operations face gas shortages due to Middle East supply chain blockades
The ongoing war in the Middle East has no impact on 95% of Larsen & Toubro's operating units in the region, said Subramanian Sarma, deputy managing director and president of the India-headquartered infrastructure powerhouse.
The L&T group has 100 sites operating in the Middle East, covering all segments of the conglomerate's business, Sarma said. "95% of our sites are working as 'business as usual'," he said, adding that there has been no disruption faced by these units since the outbreak of the war.
The remaining 5% of the sites were "suspended or disrupted", as they are located close to military bases, he explained. These 5% are either voluntarily suspended or "have been suspended for sometime on customers' request", the top L&T official added.
“We haven't reached a stage where we have to make any calls. It is business as usual," he further said.
The clarification comes at a time when the raging war between Iran and the US-Israel combine has raised cloud over businesses that have significant investments involved in the Middle East.
The war, which broke out on Feb. 27, has engulfed most of the region as Iran has launched a rigorous offensive to destroy the US military bases located in the Gulf countries. This came after the US and Israeli strikes eliminated the country's Supreme Leader, Ayatollah Ali Khamenei, and led to the death of scores of civilians, including children.
Presence In Middle East
The L&T, Sarma said, has expanded into the Middle East over the past three decades. The conglomerate's area of focus in the region involves renewables, solar power and data centres.
The Middle East portfolio is so strong that “I can say that this is our second home”, he pointed out, while adding that the company has deputed "senior leaders, including 6-7 presidents", permanently in the region.
ALSO READ: L&T Target Price Cut: Goldman Sachs Expects Slower Gulf Execution, Margin Pressure
Navigating Logistics and the Supply Chain
While operational sites remain largely stable, the logistics landscape has faced significant headwinds. Over the last two weeks, a disruption in shipping channels has hampered supplies originating from China and Europe, according to Sarma. New materials have faced delays in lifting, creating a bottleneck in the movement of essential goods.
However, the situation is showing signs of recovery compared to a week ago. L&T is actively pivoting to mitigate these challenges by utilising alternative ports in the Red Sea and Oman, he said. Engagement with partners regarding discharge at these new hubs is already underway. With a strategic window of two to three months, the company is currently evaluating and securing alternative modes of transport to ensure long-term stability.
Financial Resilience and Customer Support
On the fiscal front, the outlook remains positive. Despite the regional volatility, customers have been supportive, and invoice collections have exceeded expectations, Sarma noted. Payments are being settled on time, and banking channels continue to operate with complete normalcy, ensuring that liquidity remains unhindered, he added.
Domestic Impact
Closer to home, the India business is feeling the weight of the conflict through energy shortages. Approximately 60% to 70% of the company's gas requirements are sourced from the Middle East. The ongoing blockade in the Strait of Hormuz has disrupted these supply lines, putting pressure on domestic operations that rely heavily on these imports, as per Sarma.
Beyond The Conflict
Looking past the immediate geopolitical friction, L&T is aggressively pivoting toward a long-term energy transition, Sarma explained. The company is doubling down on its commitment to sustainable infrastructure, with a clear focus on: Green hydrogen and ammonia, renewable expansion, and diversified power sources.
Despite the current regional tensions, Sarma sees a horizon of fresh opportunities emerging across West Asia and the Middle East, fueled by the global shift toward decarbonisation.
L&T Vs The Broader Market
While the Iran war jitters have weighed in on the entire Indian equity market, L&T has taken a noticeably harder hit due to its direct exposure.
The company's scrip has plunged by about 19% over the past month, whereas the benchmark Nifty 50 is down by 9.3%.
Despite the sharp near-term correction and technical headwinds, institutional sentiment remains resilient. Most major brokerages are maintaining their "Buy" ratings, viewing this dip as a temporary geopolitical hurdle.
Here is where top brokerages are pegging L&T's target price moving forward:
- CLSA: Rs 4,842
- JPMorgan: Rs 4,570
- Jefferies: Rs 4,500
- Citi: Rs 4,450
- Goldman Sachs: Rs 4,420
The consensus target of Rs 4,544 points towards a potential upside of over 30%. However, this likely remains contingent on three critical pillars: the stabilisation of the Middle East conflict, the long-term viability of alternative shipping routes, and the management's ability to maintain "business as usual" across project executions.
ALSO READ: L&T Target Price Cut: Middle East Woes May Weigh On Order Wins, Revenue, Says UBS
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