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L&T Stock Plummets Amidst Escalating Middle East Tensions
5 Mar
Summary
- Larsen and Toubro shares dropped nearly 10% due to Middle East conflict.
- 37% of L&T's order book is exposed to the volatile Middle East region.
- Fixed-price contracts risk margin erosion amid potential cost increases.
Shares of Larsen and Toubro (L&T) experienced a sharp decline of nearly 10% over two trading sessions. This downturn occurred subsequent to attacks between the US, Israel, and Iran, which have intensified geopolitical risks in the Middle East.
The primary concern for the market is L&T's substantial order book exposure to West Asia. As of the first nine months of the current financial year, 37% of the company's total order book, valued at 7.3 lakh crore, is situated in this volatile region.
Further compounding these concerns, 33% of L&T's order inflows during the first nine months of FY2026 originated from West Asia, including key markets like Saudi Arabia and the UAE. The company had strategically increased its presence in the Middle East to benefit from regional expansion projects.
Analysts highlight risks associated with L&T's reliance on the region's supply chains and the potential for margin erosion. Macquarie noted that 55% of the company's Gulf order book consists of fixed-price contracts, which could become problematic if costs for crude oil, freight, and insurance escalate due to ongoing conflict.
While some analysts, like CLSA, view the stock dip as a "buying opportunity," others have adjusted their price targets downwards. Motilal Oswal maintained a "buy" rating but reduced its price target to ₹4,400 from ₹4,600.
