ADDING TO THE CORE

L&T POWERS PROFIT GROWTH THROUGH SERVICES SHIFT WHILE STRENGTHENING ITS CORE INFRASTRUCTURE AND ENGINEERING BUSINESSES.

- BY P.B. JAYAKUMAR

WHEN S.N. SUBRAHMANYAN took charge as chief executive and managing director of Larsen & Toubro (L&T) on July 1, 2017, investors had one persistent concern: despite being India's largest engineering and infrastructure conglomerate with operations across more than 80 businesses, L&T’s profits did not match its massive scale.

The reason was clear: infrastructure construction, the company’s mainstay, was a low-margin business. In FY18, L&T posted consolidated revenues of ₹1.19 lakh crore on the back of an order book of ₹2.63 lakh crore, but its profit after tax (PAT) was ₹7,370 crore—a modest return for such scale.

Over the next few years, Subrahmanyan—a company veteran who had spent nearly four decades shaping L&T’s infrastructure and marquee projects—confronted a dual challenge: restructuring the group to enhance profitability and steering it through the disruptions of the pandemic.

By the time he assumed the role of chairman and MD in October 2023, the results of that transformation were clear.

"Our services businesses now contribute nearly 25% of total turnover and almost 30% of profit. If they reach 30-35% of revenues, they could contribute 45-50% of total profits," Subrahmanyan notes.

The numbers validate the strategy. In FY25, L&T's consolidated revenues crossed ₹2.60 lakh crore, while net profit rose to ₹15,037 crore—doubling from FY18. In the first half of the current fiscal, revenues reached ₹1.31 lakh crore, PAT grew 22% year-on-year to ₹7,543 crore, and its order book stood at a record ₹6.67 lakh crore. Between FY17 and FY25, L&T’s market capitalisation grew 3.3x, revenues 2.3x, PAT 2.7x, and order book 2.2x. Return on Equity (RoE), a key parameter in judging the growth of a company, grew 1.2x.

THRUST ON IT, SERVICES