Red Sea crisis a storm for L&T?

If concerns about the impact of the Red Sea conflict on Larsen and Toubro Ltd (L&T) are on investors' minds, the company's stock performance suggests a different story. The shares of L&T flirted with a fresh 52-week high of ₹3,605.70, hit on Monday.

- Dipti Sharma

On Tuesday, L&T said that its construction arm has bagged a "mega" order, valued between ₹10,000 crore and ₹15,000 crore for constructing a high-speed electrification system for the Mumbai-Ahmedabad bullet train project. This significant domestic contract is expected to bolster L&T's order book and revenue stream.

While this bodes well, L&T's operations in West Asia, especially in light of the Red Sea crisis, could raise concerns over margins and execution. The impact, though, is likely to be minimal.

L&T's Middle East (West Asia) exposure by revenue (FY23) are largely to Saudi Arabia, the United Arab Emirates and Qatar, analyst Priyankar Biswas of BNP Paribas notes. The company does not have any material exposure to either Israel or Yemen, which means there is no exposure to direct conflict zones.