Fitch Ratings has assigned Larsen & Toubro Limited (L&T) first-time Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) of ‘BBB+’, with a Stable Outlook. This rating reflects L&T’s robust market position as a global engineering and construction (E&C) giant, noted for above-average profitability and solid revenue visibility.
L&T’s strong financial structure and flexibility are pivotal, backed by its diversified earnings from IT and technical services, mitigating inherent E&C sector risks. The Local-Currency IDR surpasses India’s sovereign Local-Currency IDR of ‘BBB-‘, emphasizing L&T’s extensive earnings diversification and offshore funding capability. The Foreign-Currency IDR aligns with the Local-Currency IDR, given L&T’s substantial earnings from developed markets and minimal hard-currency debt.
Key drivers include L&T’s strong competitive position in the energy and hydrocarbon sectors in the Gulf Cooperation Council (GCC) countries, and significant IT business contributions through its subsidiaries, LTIMindtree Limited and L&T Technology Services Limited. These segments offset E&C sector volatility, enhancing profitability and stable cash flow.
L&T’s impressive $57 billion order backlog underpins high revenue visibility, bolstered by substantial infrastructure investments in India and GCC countries. The company’s diversification across various markets and strong E&C margins, supported by prudent risk management, further solidify its financial health.
Looking ahead, Fitch expects L&T to maintain low financial leverage and strong free cash generation, supported by rising EBITDA and robust revenue visibility. The company’s financial flexibility is underscored by sustained debt reduction, strong EBITDA interest coverage, and strategic growth investments.
