Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AAA/Stable/Crisil A1+’ ratings on the bank facilities and debt instruments of Larsen and Toubro Limited (L&T; part of the L&T group). Also, Crisil Ratings has withdrawn its rating on non-convertible debentures of Rs 6,500 crore upon redemption and on receipt of repayment confirmation from the debenture trustee (see ‘Annexure - Details of rating withdrawn'). The withdrawal is in line with the Crisil Ratings’ policy on withdrawal of ratings.

 

The ratings continue to reflect the dominant position of the L&T group in the engineering, procurement and construction (EPC) market in India, its diversified presence, strong financial risk profile and robust financial flexibility. These strengths are partially offset by large working capital requirement in the EPC segment.

 

Consolidated revenue, excluding financial services, rose 16% on-year to around Rs 2,40,540 crore in fiscal 2025, driven by strong execution of large order book in the EPC business. Earnings before interest, tax, depreciation and amortisation (Ebitda) margin, excluding financial services, slightly declined from 11.2% in fiscal 2024 to 10.8% in fiscal 2025, mainly owing to moderation in margin in the Information technology and technology services (IT & TS) segment from 20.4% in fiscal 2024 to 19.5% in fiscal 2025, while the margin remained stable for the EPC business at 8.3%. The order book was Rs 5.8 lakh crore as on March 31, 2025. Coupled with healthy sector outlook, this provides strong prospects for growth in the company’s topline while sustaining its profitability.

Analytical Approach

Crisil Ratings has used a combination of full, proportionate and moderate consolidation of the L&T group companies. It has used the capital allocation method for the subsidiaries in the financial services business, by factoring in the capital required for maintaining their credit profiles.

 

Crisil Ratings has fully consolidated L&T’s subsidiaries, because these entities form a core of the business risk profile of L&T.

 

Crisil Ratings has fully consolidated the special-purpose vehicle (SPV), L&T Metro Rail (Hyderabad) Ltd (LTMRHL; ‘Crisil AAA (CE)/Stable/Crisil A1+’), as L&T is providing guarantee for its debt instruments. Debt in the remaining infrastructure SPVs has not been consolidated as it is non-recourse to L&T. However, in line with the moderate consolidation approach, Crisil Ratings has factored in support from L&T to fund any equity requirement, cost overruns and debt obligation in these SPVs.

 

Crisil Ratings has proportionately consolidated two joint ventures to the extent of the shareholding of L&T to reflect support required to the extent of its interests in these businesses.

 

Crisil Ratings continues to not consolidate Nabha Power Ltd (Crisil AA/Stable/Crisil A1+) as the corporate guarantee extended by L&T ceased to exist upon refinancing of the guaranteed debt with term loans. Furthermore, the company has been considered a part of the non-core assets by L&T and the parent has publicly articulated its intent to divest the asset.

 

To arrive at the adjusted net debt, surplus cash (exceeding Rs 5,500 crore that is assumed as minimum operational cash) has been reduced.

 

Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Dominant position in the domestic EPC segment and diversified revenue profile: The group’s dominance in the domestic EPC segment is supported by its track record of more than seven decades, ability to cater to several sectors and strong brand. The business spans a spectrum of projects, ranging from complex turnkey EPC projects to simple construction activities. In-house design, engineering and fabrication capabilities for critical equipment and systems give a strong competitive advantage. Robust competencies across segments and sectors along with a track record of completing projects as per specifications have led to a strong brand image for L&T in India and overseas.

 

As of March 2025, the group had orders of Rs 5.8 lakh crore, led by infrastructure (62%), energy (28%), hi-tech manufacturing (7%) and the rest from other segments. International orders accounted for 46% of the order book with the bulk of these from the Middle East. These should provide strong revenue visibility over three fiscals.

 

The group enjoys healthy diversity, supported by increasing revenue contribution of the service-oriented businesses ― IT&TS and financial services, which accounted for around 25% of consolidated revenue during fiscal 2025.

 

Crisil Ratings believes the L&T group will maintain its dominant position in the EPC market in India by judiciously bidding for projects across infrastructure, defence, solar, energy storage and water treatment sectors.

 

• Healthy capital structure and robust financial flexibility: The group has a conservative financial policy, as reflected in Crisil Ratings-adjusted net debt to Ebitda ratio of 0.22 time as on March 31, 2025 (including capital allocation for the finance subsidiary), driven by strong cash accrual built-up through the core business. The ratio improved as compared to March 2024, because of an increase in cash balance, while debt remained steady.

 

Financial flexibility is supported by the group’s ability to raise funds at competitive rates as well as robust consolidated cash and equivalent (except financial services) of more than Rs 33,200 crore as of March 2025. It is also bolstered by the significant market value of the listed investments in the IT&TS and financial services companies. Crisil Ratings expects the capital structure, debt protection metrics and financial flexibility to remain strong.

 

• Healthy share of the high-margin IT&TS segment: Share of the IT&TS segment in the revenue and operating profit was around 19% and 32% respectively, on a consolidated basis during fiscal 2025. The IT&TS segment is a high-margin business and less working capital intensive than the EPC segment, resulting in higher return on capital employed (adjusted RoCE). Consolidated adjusted RoCE has been above 15% over the six fiscals through 2025. The RoCE is expected to remain strong with better profitability over the medium term.

 

Weaknesses:

• Large working capital requirement: Gross current assets (GCAs) net of cash (Crisil Ratings – adjusted) were high at around 232 days as on March 31, 2025. However, the group manages working capital through customer advances and payables. The order book is well-diversified across sectors and geographies mitigating credit risk. The rising revenue share of IT&TS has also helped to contain working capital requirement with standalone GCAs being higher.

 

Given the intent of the management to judiciously bid for projects with lower working capital requirement and its efforts to reduce receivables and inventory, GCAs are expected to improve and will remain monitorable over the medium term.

 

• Significant capital employed in low-return developmental projects: Substantial capital is employed in developmental projects under LTMRHL. The operations of LTMRHL, commissioned around seven years ago with significant time and cost overruns, were adversely impacted by the pandemic-led lockdowns. As a result, daily traffic declined sharply to less than 2 lakh commuters. The average daily traffic gradually recovered post pandemic and reached 4.4 lakh commuters by fiscal 2025.

Liquidity: Superior

L&T has robust liquidity, driven by cash and equivalent (except financial services business) of around Rs 33,200 crore as of March 2025. The expected net cash accrual of more than Rs 10,000 crore in fiscal 2026 should be sufficient to cover incremental working capital, capital expenditure, scheduled debt obligation as well as support towards subsidiaries, including LTMRHL.

 

Environmental, social and governance (ESG) profile

The EPC sector has a significant environmental and social impact given its nature of operations with higher emissions, waste generation and water consumption affecting local community and increasing the possibility of health hazards.

 

However, Crisil Ratings believes that the ESG profile of L&T supports its already strong credit risk profile. The company is taking a slew of initiatives towards environmental and social causes, some of which are highlighted below.

Key ESG highlights of L&T:

• L&T has set a target to achieve carbon neutrality by 2040 and water neutrality in its operations by 2035 at the standalone level. Furthermore, the company has raised ESG bonds of Rs 500 crore in fiscal 2026 to promote transparency, accountability and alignment with international ESG standards
• Several listed subsidiaries of L&T have also established sustainability targets: L&T Finance Ltd has committed to achieving carbon neutrality by 2035, while L&T Technology Services Ltd aims to become both carbon and water neutral by 2030.
• In-line with its target to achieve carbon neutrality, the company has increased its renewable energy consumption by ~62% in fiscal 2025 on-year with share of renewable energy moving to 3% of its overall energy mix.
• In its EPC business, the share of revenue from green businesses, which includes clean energy-solar and hydel power plant, clean mobility- mass transit systems, green infrastructure- green buildings, water and sanitation- water, wastewater and effluent treatment plants and others (smart city system, process equipment for biodiesel/clean fuels, surface miners) was around 53% of standalone revenue in fiscal 2025.
• L&T’s lost time injury frequency rate of its employees (at 0.07time) and workers (at 0.12time) and attrition rate of employees (at ~8%) was relatively low. However, it reports 34 fatalities in its workforce in fiscal 2025.
• The governance structure is characterised by a majority independent board (~53% are independent directors), ~7% women directors, fully independent audit committee, majority independent risk management and nomination and remuneration committees and extensive financial disclosures.

 

There is growing importance of ESG among investors and lenders. The commitment of L&T to ESG will play a key role in enhancing stakeholder confidence, given the high shareholding by foreign portfolio investors and access to both domestic and foreign capital markets.

Outlook: Stable

Crisil Ratings believes L&T will maintain its leadership position in the EPC segment and is positioned to benefit from the infrastructure spending in India over the medium term. Its profitability is expected to be stable, supported by the increasing contribution of the IT business.

Rating sensitivity factors

Downward factors

• Significant stretch in the working capital cycle on sustained basis
• Significant decline in ROCE to below 14% on sustained basis

About the Company

Set up in 1938 by Mr HH Larsen and Mr SK Toubro, L&T was incorporated in 1946 and reconstituted as a public limited company in 1950. It is one of Asia’s largest vertically integrated EPC conglomerates, with a strong market position across segments such as infrastructure, power, hydrocarbons, heavy engineering, precision engineering and systems, IT&TS, metallurgical and material handling, and machinery and industrial products. L&T undertakes infrastructure development projects (metro rail and power generation) through its SPVs: LTMRHL and L&T PDL.

Key Financial Indicators L&T (Standalone; Crisil Ratings _adjusted)

Particulars (year ended March 31)	Unit	2025	2024
Revenue	Rs crore	1,43,045	1,27,242
Profit after tax (PAT)	Rs crore	10,870	9,304
PAT margin	%	7.6	7.3
Adjusted debt / adjusted networth	Times	0.31	0.35
Interest coverage	Times	4.58	3.52

 

Any other information: Not applicable

Annexure – List of entities consolidated

Name of the company	Extent of consolidation	Rationale for consolidation
L&T Metro Rail (Hyderabad) Ltd	Full	All these entities have significant managerial, operational and financial linkages and are collectively referred to as the L&T group.
Hi-Tech Rock Products & Aggregates Ltd
L&T Geostructure Pvt Ltd
L&T Infrastructure Engineering Ltd
Larsen & Toubro (East Asia) Sdn.Bhd
Larsen & Toubro (Oman) LLC
Larsen & Toubro (T&D) SA (Proprietary) Ltd
L&T Hydrocarbon Saudi Company
L&T Modular Fabrication Yard LLC
L&T Offshore Pvt Ltd (formerly known as L&T Sapura Offshore Pvt Ltd)
L&T Sapura Shipping Pvt Ltd
Larsen & Toubro Electromech LLC
Larsen & Toubro Heavy Engineering LLC
Larsen & Toubro Kuwait Construction General Contracting Company W.L.L.
Larsen Toubro Arabia LLC
L&T Special Steels And Heavy Forgings Pvt Ltd
L&T MBDA Missile Systems Pvt Ltd
L&T Construction Equipment Ltd
L&T Valves Ltd
L&T Valves Arabia Manufacturing LLC
L&T Valves USA LLC
LTIMindtree Ltd
Cuelogic Technologies Pvt Ltd
LTIMindtree Information Technology Services (Shanghai) Co. Ltd. (Formerly know as L&T Information Technology Services (Shanghai) Co. Ltd.)
LTIMindtree Spain SL (Formerly known as L&T Information Technology Spain S.L.)
LTIMindtree Financial Services Technologies Inc
LTIMindtree S.De.Rl.De.Cv
LTIMindtree Canada Ltd
LTIMindtree Gmbh
LTIMindtree LLC
LTIMindtree Norge As
LTIMindtree South Africa (Pty) Ltd
LTIMindtree UK Ltd (Formerly known as LTIMindtree Infotech UK Ltd)
LTIMindtree Middle East FZ-LLC
Nielsen + Partner Unternehmensberater Gmbh
LTIMindtree Switzerland AG ( Formerly known as Nielsen + Partner Unternhmensberater AG)
LTIMindtree (Thailand) Limited (Formerly known as Nielsen&Partner Company Ltd)
Nielsen&Partner Pty. Ltd
Nielsen+Partner Pte. Ltd
Syncordis SARL, France
Syncordis Ltd UK
LTIMindtree PSF S.A. (Formerly known as Syncordis PSF S.A.)
LTIMindtree S.A. (Formerly known as Syncordis S.A)
LTIMindtree USA Inc.
LTIMindtree Consulting Brazil LTDA
L&T Technology Services Ltd
Graphene Semiconductors Services Pvt Ltd
L&T Technology Services Pte Ltd
Graphene Solutions SDN.BHD
Graphene Solutions Taiwan Ltd
L&T Technology Services (Canada) Ltd
L&T Technology Services (Shanghai) Co. Ltd
L&T Technology Services LLC
L&T Thales Technology Services Pvt Ltd
Orchestra Technology Inc.
L&T - Sargent & Lundy Ltd
Larsen & Toubro Qatar LLC (under liquidation)
Elante Properties Private Limited ( formerly known asL&T Parel Project Pvt Ltd)
L&T Howden Pvt Ltd
Bhilai Power Supply Company Ltd.
L&T Aviation Services Pvt Ltd.
L&T Hydrocarbon Caspian LLC
Larsen And Toubro Saudi Arabia LLC
PT. Larsen & Toubro Hydrocarbon Engineering Indonesia
L&T Capital Company Ltd.
L&T Global Holdings Ltd.
L&T Energy Green Tech Ltd
Larsen & Toubro International Fze.
Raykal Aluminium Company Pvt Ltd
Hydrocarbon Arabia Ltd Company
GH4 India Pvt Ltd
Larsen and Toubro CIS FE LLC
L&T Realty Developers Ltd
Chennai Vision Developers Pvt Ltd
L&T Innovation Campus (Chennai) Ltd
L&T Realty Properties Limited ( formerly known as L&T Seawoods Ltd
Avenue Techpark (Bangalore) Pvt Ltd
Bangalore Spectrum Techpark Pvt Ltd
Bangalore Galaxy Techpark Pvt Ltd
Chennai Nova Techpark Pvt Ltd
Business Park (Powai) Pvt Ltd
Millennium Techpark (Chennai) Pvt Ltd
Bangalore Fortune Techpark Pvt Ltd
Corporate Park (Powai) Pvt Ltd
LH Uttarayan Premium Realty Pvt Ltd
L&T Electrolysers Ltd
LH Residential Housing Pvt Ltd
L&T Semiconductor Technologies Ltd
L&T Technology Service Poland
L&T Power Development Ltd
L&T Network Services Pvt Ltd
L&T Energy Hydrocarbon Engineering Ltd (formerly L&T - Chiyoda Ltd)
L&T Infra Investment Partners
Elevated Avenue Realty LLP(formerly known as L&T Avenue Realty LLP)
L&T Westend Project LLP
Prime Techpark (Chennai) Pvt Ltd
Intelliswift Software(India) Private Limited
PT Larsen and Toubro
L&T Himachal Hydropower Ltd
Indiran Engineering Projects and Systems Kish PJSC
L&T - MHI Power Boilers Pvt Ltd	Proportionate
L&T - MHI Power Turbine Generators Pvt Ltd
L&T Finance Ltd	Capital allocation
L&T Financial Consultants Ltd
L&T Infra Investment Partners Advisory Pvt Ltd
L&T Infra Investment Partners Trustee Pvt Ltd