Larsen & Toubro Ltd Case Study: Business Model, Financials, KPIs, and SWOT Analysis

Larsen & Toubro Ltd. (L&T) is an Indian multinational company handling different business segments like engineering, construction, manufacturing, technology, and financial services. 

Want to know how Larsen & Toubro is growing in the market? Today’s blog will cover all the essential aspects of the company’s business segment, financials, and SWOT Analysis.

Overview of Larsen & Toubro Ltd

Larsen & Toubro Ltd. holds a strong name in the Indian market. This company operates in the construction industry, specially civil infrastructure, transportation infrastructure, power transmission, and manufacturing defense & aerospace machinery. 

The company was established by two Danish engineers, Henning Holck Larsen and Soren Kristian Toubro, in 1938 in Mumbai, Maharashtra. Currently, Larsen & Toubro Ltd operates in more than 50 countries across the Middle East, North Africa, South East Asia, and Europe. 

In FY23, the company generated 62% of its revenue from India and the rest 38% from other countries. As of 31st March 2023, the L&T Group comprises 5 associates, 97 subsidiaries, and 15 joint ventures.

Here are some quick stats of the company

Company Type	Public
Industry	Conglomerate
Founded	1938
Founders	Henning Holck-LarsenSoren Kristian Toubro
Headquarters	Mumbai, Maharashtra, India
Area served	Worldwide

Major Subsidiaries

Some of the company’s subsidiaries are mentioned below:

Construction

• L&T Constructions
• L&T Realty
• L&T Metro Rail Hyderabad

EPC Projects

• L&T Power
• L&T Energy Hydrocarbon

Technology

• L&T Technology Services

Information Technology

• LTIMindtree

Manufacturing

• L&T Shipbuilding
• L&T Defence

Awards & Recognition

• 2020 – Company of the Year Award
• 2021 – Ranked 4th in the LinkedIn Top Companies list, India. 
• 2022 – Ranked 2nd in the Top 25 EPC Contractors in the Middle East by Oil & Gas Middle East.

Business Model of Larsen & Toubro Ltd

The Larsen and Toubro business model focuses on diverse sectors including engineering, construction, manufacturing, and technology services for global markets.

L&T’s revenue has been structured into five broad categories:

• Construction – This segment covers a lot of construction-related projects around Buildings & Factories, Civil Infrastructure, Transportation Infrastructure, and Power Transmission & Distribution.
• Manufacturing – This segment covers Defence Equipment & Systems, Construction, Mining & Industrial Machinery, Heavy Engineering, Industrial Valves and Electrical & Automation Systems
• EPC Projects – This segment covers Hydrocarbon Engineering, Power, and Power Development.
• Services – L&T also provides expertise in IT solutions, data management, smart city infrastructure, and financial advisory services.
• Others – This segment caters to projects that do not lie in any other segment such as Hyderabad Metro, Infrastructure Development Projects, and corporate functions

Strategies

L&T is known for incorporating multiple strategies to retain and increase market share in the long run. Some of these strategies are:

• Activities: Larsen & Toubro Ltd. encompasses manufacturing, designing, and developing its products, as well as offering services to clients. 
• Customer Relationships:  The company provides extensive support via email and customer care numbers. It believes in building strong, familiar relationships with customers. 
• Channels: One of the primary channels of the company is its business development and sales team. The company promotes its offerings through social media pages, advertising, websites, and conference participation.
• Value Proposition:  The company creates accessibility by offering its clients a wide variety of options. It focuses on providing high-quality and robust solutions and services to its clients and customers in manufacturing and financial services.

Market Data of Larsen & Toubro Ltd

Some of the company’s market data is given below:

Market Cap	₹ 529,488 Cr.
TTM P/E	41.86
ROCE	12.98 %
Book Value	₹ 635.41
ROE	14.78 %
52 Week High / Low	₹ 3,860 / 2,168
Dividend Yield	0.64 %
Face Value	₹ 2.00

Financial Highlights of Larsen & Toubro Ltd

Income Statement

Particulars	Mar-23	Mar-22	Mar-21	Mar-20
Operating Revenue	1,83,340.70	1,56,521.23	1,35,979.03	1,45,452.36
Total Income	1,89,162.20	1,63,493.02	1,42,107.15	1,50,398.09
Total Expenditure	1,58,936.85	1,36,594.88	1,14,907.47	1,23,235.42
Profit before Tax	17,109.03	14,494.97	8,679.78	13,430.95
Profit after Tax	12,624.87	10,291.05	4,668.96	10,167.75
Consolidated Profit	10,470.72	8,669.33	11,582.93	9,549.03

The company’s income statement shows a growing trend as the company’s revenue and profit increased by 17% and 20.7%, respectively in FY23 

Balance Sheet

Particulars	Mar-23	Mar-22	Mar-21	Mar-20
Current Liabilities	1,62,065.99	1,59,360.85	1,37,404.81	1,42,745.04
Non-Current Liabilities	60,734.31	62,412.83	83,248.64	83,320.29
Current Assets	2,21,215.52	2,07,372.30	1,94,960.59	1,78,322.68
Non-Current Assets	1,04,163.20	1,09,024.06	1,13,609.88	1,21,603.66

The company’s balance sheet showcases a growing trend in current assets, which is fueled majorly by current liabilities. This approach limits debt growth in the long run. 

Cash Flow Statement

Particulars	Mar-23	Mar-22	Mar-21	Mar-20
Cash From Operating Activities	22,776.96	19,163.58	23,073.82	6,693.88
Cash Flow from Investing Activities	-8,311.70	-3,667.68	-5,658.52	-8,256.27
Cash from Financing Activities	-11,572.49	-15,181.48	-15,274.38	6,371.55
Net Cash Inflow / Outflow	2,892.77	314.42	2,140.92	4,809.16

The graph and table reveals a lot of turbulence in the company’s operations as it is diverting a significant amount of funds to pay-off debt and invest in new ventures. 

Profitability Ratios

Particulars	Mar-23	Mar-22	Mar-21	Mar-20
ROCE (%)	12.98	11.61	9.97	12.49
ROE (%)	14.78	13.07	6.58	15.84
ROA (%)	3.92	3.29	1.52	3.51
EBIT Margin (%)	11.40	10.85	13.36	13.58
Net Margin (%)	6.67	6.29	3.29	6.76
Cash Profit Margin (%)	8.80	8.46	5.57	8.68

The company’s margin trend shows an uptrend, thus revealing a growth in the profitability. This growth is also reflected in ROCE and ROE. 

Future Outlook

• The company expects EBITDA margin to be in the range of 8.5%-9% in FY24 from the earlier guidance of ~9%. 
• Larsen & Toubro (L&T) aims to double revenue and order inflow by 2025-26 through a five-year strategic plan called Lakshya’26 that aims at exiting non-core operations and expanding the services business.

SWOT Analysis of Larsen & Toubro Ltd

The SWOT Analysis of L&T highlights its strengths, weaknesses, opportunities, and threats, showcasing its market position and growth potential.

Strengths

• L&T Ltd. enjoys the benefits of brand identity and brand value in the construction and manufacturing segment, thus helping to increase trust in its clients.
• The company has a diverse business portfolio, which gives it an advantage in navigating different market conditions and capitalizing on opportunities in multiple industries, such as construction, engineering, and manufacturing.
• The company has a robust financial performance and also observed impressive revenue growth over the years.

Weaknesses

• L&T has been battling high debt, which can challenge the company’s financial stability and growth prospects.
• The company heavily depends on the domestic market for revenue; slight fluctuation in the market will also affect the company.

Opportunities

• The company must ensure that each acquisition aligns with its long-term goals and strengthens its core competencies.
• They must explore opportunities in international markets, particularly in some places experiencing rapid infrastructure development. 

Threats

• L&T operates in a highly competitive atmosphere, facing competition from domestic players and global companies entering the Indian market.
• The company operates in an industry that has a history of exploiting environmental bodies.  

Conclusion

Larsen & Toubro Ltd has a strong presence in the global market. It has a diverse portfolio and has achieved impressive financial performance. The company aims to double its revenue and order inflow by 2025-26 through a strategic plan called Lakshya’26.

While the majority of the indicators point towards the company’s prosperous future, it is advised that you perform your analysis before investing your hard-earned money.  

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