95% of L&T’s Middle East Projects Continue Despite Conflict

L&T Middle East Projects Largely Unaffected Amid Ongoing Conflict, Flags Supply Chain Risks​

Mumbai, March 22: Engineering, procurement and construction major Larsen & Toubro (L&T) has reported minimal disruption to its operations in the Middle East despite the ongoing conflict, with nearly 95 percent of its projects continuing as usual.

Majority of Projects Continue Operations​

The company, which derives over 35 percent of its revenue from the Middle East, stated that only a small portion of its projects has been impacted. Subramanian Sarma, Deputy Managing Director of L&T, confirmed that work has been suspended in 5 out of nearly 100 projects due to risk-related decisions or customer advisories.

“There has been no disruption in 95 percent of the sites. It is business as usual,” Sarma said.

He added that the halted projects currently do not significantly affect the company’s overall revenue.

No Immediate Revenue Impact, But Risks Remain​

L&T does not anticipate any immediate hit to its topline. However, Sarma cautioned that if ongoing logistical disruptions persist beyond three months, the company could face revenue deferment.

While he did not directly comment on the impact on profit margins, Sarma indicated that the company expects to pass on any increase in costs to customers, depending on contract structures.

Logistics and Supply Chain Emerge as Key Challenges​

The company has identified logistics and supply chain disruptions as the primary concerns arising from the conflict. Over the past two weeks, supply lines have been affected, particularly for materials sourced from regions such as China and Europe due to shipping disruptions.

L&T typically maintains a three-month inventory buffer at project sites, which is currently helping manage short-term disruptions. However, alternative logistics routes are being explored, including the use of ports in Oman to bypass challenges in the Strait of Hormuz.

Workforce Safe, Deployment Paused​

Sarma confirmed that all employees and workers in the Middle East remain safe, with no project sites affected by direct attacks. The company currently has around 8,000 employees, 2,000 family members, and 20,000 contractual workers in the region.

L&T has paused sending new workers to the Middle East since the conflict began, although no existing staff have expressed a desire to return.

Cost Pressures and Insurance Outlook​

On the cost front, Sarma described the situation as mixed, with some projects operating under fixed-price contracts while others allow for price variations. Drawing parallels with the Covid period, he expressed hope that customers may absorb higher costs where necessary.

Insurance premiums for existing projects remain unchanged, but costs for new projects are expected to rise and will be factored into future pricing.

Strategic Monitoring and Long-Term Outlook​

L&T has set up a situation management committee comprising senior executives to monitor developments and coordinate with key stakeholders, including Indian missions in the region.

Despite the current geopolitical tensions, the company remains optimistic about long-term opportunities in the Middle East. Sarma highlighted potential growth areas such as post-conflict reconstruction, accelerated project awards, expansion in renewable energy, and new oil and gas evacuation infrastructure.

He also noted that improved global integration of Iran, if sanctions ease, could open up new business avenues, although L&T currently has no exposure to the country.

Describing the region as a “second home,” Sarma emphasized that the Middle East continues to be a strategically important and rewarding market for the company, with the current conflict seen as a temporary disruption.