> ## Content Index > Fetch the complete content index at: https://www.moatmarginresearch.com/llms.txt > Use this file to discover other available public pages before exploring further. # L&T's Profit Rose 33%. Its EBITDA Rose 1%. - URL: https://www.moatmarginresearch.com/larsen-toubro-q2-record-orders-flat-ebitda/ - Published: 2026-10-28T02:50:24.000Z - Updated: 2026-10-28T02:50:24.000Z - Description: L&T's Q2 FY27 profit rose 33% and orders hit a record, but EBITDA rose 1%. Our arithmetic: other income and lower finance costs explain most of the pre-tax gain - Author: A K Karthikeyan - Tags: Moat Insights **Larsen & Toubro booked a record ₹1,47,665 crore of orders in the September quarter and reported profit up 33%. But EBITDA, the operating profit before other income, rose 1%, and its margin fell to 8.7% from 10.0%. Most of the pre-tax profit gain sits below that line. Here is what it is made of.** Unless stated, figures are consolidated, for the quarter ended 30 September 2026 (Q2 FY27) against the quarter ended 30 September 2025 (Q2 FY26). L&T's numbers are in ₹ crore; its presentation uses ₹ billion (₹100 crore = ₹1 billion). ## The idea in one sentence At L&T this quarter, orders and profit are not the same story: the orders showed up as revenue, and the profit rise came mostly from lines below EBITDA. ## The fact that breaks the assumption Revenue from operations rose by ₹10,766 crore, to ₹78,750 crore from ₹67,984 crore (+16%). EBITDA rose by ₹39 crore, to ₹6,845 crore from ₹6,806 crore (\[A\] p. 9; \[B\] slide 8). The company shows that as +1%; unrounded, it is 0.6%, and the statement's unrounded lines give a rise of about ₹38 crore (our arithmetic). On our arithmetic, that is about 36 paise of extra EBITDA for every ₹100 of extra revenue. Two things sit inside that figure. First, the company's EBITDA is struck after the finance cost of its financial services business and finance lease activity, ₹1,969 crore against ₹1,707 crore (\[A\] p. 11; \[B\] slide 8); the "Finance costs" line in the profit bridge below is the separate, remaining finance cost. Second, the Development Projects segment, which held Nabha Power (divested on 25 June 2026) and Hyderabad Metro (to 30 April 2026), went from revenue of ₹1,533 crore and EBITDA of ₹167 crore to nil revenue and an EBITDA loss of ₹12 crore (\[A\] pp. 7, 9; \[B\] slide 30). Yet profit after tax, attributable to the company's owners, rose to ₹5,202 crore from ₹3,926 crore, which the company reports as +33% (\[A\] pp. 3, 9). The company's own reading of the half-year is the same shape: for April to September, EBITDA was ₹12,961 crore against ₹13,124 crore a year earlier (down 1%), while profit rose 24% (\[A\] p. 9). The auditors' conclusion on these results is not modified. These are unaudited, limited-review numbers (\[A\] pp. 21-22). ## One concrete thing, followed: CarbonLite Solutions Take one business inside the Energy-Conventional segment. CarbonLite Solutions took ₹11,440 crore of orders this quarter against ₹370 crore a year earlier. Its revenue rose to ₹2,020 crore from ₹780 crore. Its EBITDA margin fell to 5.8% from 19.0% (\[B\] slide 32, converted from ₹ billion). On the rounded margins, that is roughly ₹117 crore of EBITDA this quarter against roughly ₹148 crore a year ago, on revenue 2.6 times as large (our arithmetic). The company's explanation for the segment: "The decline in margin is primarily attributable to a higher proportion of orders in early stages of execution within the CarbonLite Solutions business" (\[A\] p. 5). The presentation adds that "PY margin included variation claims in CarbonLite Solutions and MRU business" (\[B\] slide 16). There is an omission to flag. The segment's other large business, Hydrocarbon, went the other way: its EBITDA margin rose to 7.5% from 6.7% on revenue of ₹15,060 crore, up 22% (\[B\] slide 32). The segment's margin fell to 7.4% from 8.2%; the company attributes the decline primarily to CarbonLite, and Hydrocarbon did not drag it. ## The mechanism: where the margin went, and where the profit came from **Margin.** The company gives three reasons across its documents. At group level, the margin was "Primarily impacted due to lower margin across portfolio and change in revenue mix (higher share of PP&M)" (\[B\] slide 8; PP&M is projects, products and manufacturing, the four segments below). In Infrastructure & Utilities, "a higher proportion of jobs below margin recognition threshold" (\[B\] slide 15), which the presentation does not define. In Energy-Conventional, early-stage jobs, as above. | Segment, Q2 | Order inflow, ₹ crore (FY26 → FY27) | Customer revenue, ₹ crore | EBITDA margin | | -------------------------- | ----------------------------------- | ------------------------- | ------------- | | Infrastructure & Utilities | 40,755 → 35,509 | 23,717 → 25,133 | 6.2% → 5.7% | | Energy - Conventional | 38,349 → 78,413 | 13,448 → 17,285 | 8.2% → 7.4% | | Energy - Green | 11,932 → 6,558 | 8,042 → 11,493 | 6.2% → 6.0% | | Manufacturing & Products | 4,303 → 5,778 | 3,355 → 4,480 | 13.5% → 15.7% | Source: \[A\] p. 9 (Annexure 1). Prior-year figures are restated for the new segment definitions. Together, these four segments (PP&M) earned ₹4,104 crore of EBITDA on revenue of ₹58,391 crore, a 7.0% margin, against ₹3,536 crore on ₹48,562 crore, 7.3% (\[B\] slide 30). Their share of group revenue was 74% against 71% (our arithmetic). Our reading: when the faster-growing part of the group is the lower-margin part, the group margin falls even if nothing else changes. Manufacturing & Products is the exception. The company attributes its higher margin to "a more favourable execution profile of projects within the portfolio" (\[A\] p. 6). **Profit.** Where did the ₹1,305 crore rise in profit before tax (up 21%, our arithmetic) come from? The 33% rise in profit attributable to owners also reflects the lower tax rate, below. | Consolidated, Q2, ₹ crore | Q2 FY26 | Q2 FY27 | Change | Share of the rise (our arithmetic) | | ----------------------------------------------- | ------- | ------- | ------ | ---------------------------------- | | EBITDA | 6,806 | 6,845 | +39 | 3% | | Other income | 1,384 | 2,306 | +922 | 71% | | Finance costs (lower is better) | 763 | 473 | \-290 | 22% | | Depreciation and amortisation (lower is better) | 1,092 | 1,037 | \-55 | 4% | | Profit before tax | 6,336 | 7,641 | +1,305 | 100% | Source: \[A\] pp. 9, 11; \[B\] slide 9\. The shares are our arithmetic. The company says the fall in finance costs was "primarily due to non-consolidation of Hyderabad Metro and decrease in Standalone debt" and the fall in depreciation was "due to non-consolidation of Hyderabad Metro" (\[B\] slide 9); it does not split the amounts. Take out other income and profit before tax was ₹5,335 crore against ₹4,952 crore, up 7.7%, against revenue up 16% (our arithmetic; not a company measure). Other income was 30% of profit before tax, against 22% (our arithmetic). Below that, the tax charge was ₹1,726 crore against ₹1,649 crore, an effective rate of 22.6% against 26.0% (our arithmetic). At last year's rate the charge would have been about ₹263 crore higher (our arithmetic). Deferred tax was a credit of ₹337 crore against a charge of ₹72 crore (\[A\] p. 11). The filings do not explain the lower rate. The company's own explanation of profit: "Growth mainly due to strong pickup in activity levels in PP&M and improved treasury operations" (\[B\] slide 9). The activity pickup shows in revenue; our bridge finds almost none of it in EBITDA, and most of the profit rise in other income and lower finance costs. **Other income.** The presentation says it was "Supported by higher group surplus funds & improved yields and one-time gain on divestment of SWC business in LTTS" (\[B\] slide 9). The amount of the one-time gain is not stated. It is also not a one-quarter spike: other income was ₹2,377 crore in the June quarter and ₹4,683 crore for the half-year against ₹2,741 crore (\[A\] p. 11). The half-year cash flow statement shows a ₹332.93 crore gain on disposal of subsidiary, associate or business undertaking, which it does not split by quarter or by deal (\[A\] p. 14). What the filings do show on funds is this. Current investments, cash and cash equivalents were ₹974 billion (₹97,400 crore) at September, against ₹804 billion at March. Net working capital was 1.7% of revenue, which the presentation calls "A Record Low", against 10.2% a year earlier. Working capital released ₹82.9 billion of cash in the quarter, excluding financial services (\[B\] slides 4, 5, 27, 29). Our reading: a large book that is paid for as it is built releases cash, and cash earns income. The company does not draw that line itself. One more caution on reading the segment table. The segment EBITDA in \[B\] slide 30 totals ₹9,151 crore including "Corporate". That equals reported EBITDA of ₹6,845 crore plus other income of ₹2,306 crore (our arithmetic), so the segment table appears to include other income. The table's own segment total, before Corporate, is ₹8,495 crore, a 10.8% margin; neither it nor the ₹9,151 crore is comparable with the 8.7%. ## The order book The consolidated order book was ₹8,53,514 crore on 30 September 2026, up 28% on a year earlier (\[B\] slide 5) and 15% on March (\[A\] p. 4). That is about three times consolidated revenue for FY26 of ₹2,85,874 crore (our arithmetic; \[A\] p. 11). International orders were 54% of the book, against 49% a year earlier, and India 46% (\[B\] slides 13, 33). The Chairman and Managing Director, S N Subrahmanyan, says: "The highest ever order book at ₹8.5 lakh crore provides multi-year revenue visibility" (\[A\] p. 4). The record rests on one segment. Energy-Conventional took ₹78,413 crore, 53% of the quarter's ₹1,47,665 crore of inflow (our arithmetic). The presentation credits "Ultra Mega and Mega orders" there (\[B\] slide 7). Middle East orders were 51% of the quarter's inflow and 40% of the book (\[B\] slides 12, 13). Infrastructure & Utilities inflow fell 13% ("deferment of select targeted orders") and Energy-Green fell 45% ("deferrals in the Solar business") (\[A\] pp. 5-6). ## Where this breaks - **Our thesis can be wrong in time.** Early-stage jobs and a prior-year base with variation claims are both timing explanations. If the new orders reach normal margins, the gap closes. The filings give no margin guidance, so we cannot say that it will. - **Other income is reported, and its parts differ.** The company ties it to surplus funds, yields and a one-time gain. The half-year cash flow statement adjusts profit for interest income of ₹2,090 crore, dividends of ₹271 crore, profit on sale or fair valuation of investments of ₹1,552 crore and the ₹333 crore disposal gain (\[A\] p. 14); it does not map these to the other income line. We are not calling it low quality. The point is only that it is not the operating margin. - **The book is concentrated and abroad.** The Middle East is 40% of the book by the company's chart, and the company's outlook, a macro passage about the world economy, says: "The Middle East continue to pose varied downside risks to global growth and investment activity" (\[A\] p. 8). Energy-Green's order book is 97% international (\[A\] p. 6). - **Low working capital cuts both ways.** Net working capital is 1.7% of revenue. Our reading is that a slowdown in inflow could unwind some of the cash released. The filings do not say so. - **Cost pressure is named.** The presentation cites "continuing cost pressures in WET projects" in Infrastructure & Utilities (\[B\] slide 15). - **Limits of this sample.** It is one quarter, against an Energy-Conventional base that, the company says, included variation claims. Prior-year segment numbers were restated, and the review covers unaudited numbers: 41 subsidiaries' figures were not reviewed by their own auditors, which management says is "not material to the Group" (\[A\] pp. 22-23). ## Why it costs the reader something A reader who takes "profit up 33%" as the speed of L&T's operations will overstate it. Profit before other income rose about 8%, and the half-year EBITDA fell. The number to watch in the next result is not the order inflow but which line carries the profit: the margin on the new work, or the treasury. ## The moat, and the score Focus moat: price discretion. A record book is evidence of winning work. Whether the work carries a margin is what price discretion would show, and this quarter it shows thinner margins in three of four project segments, with Manufacturing & Products the exception. One quarter proves nothing either way. Our moat page for the company is [here](https://www.moatmarginresearch.com/larsen-and-toubro-moat/) (\[F\]). MoatSCORE (provisional, first-pass) 5.21 on our [Moat Screener](https://www.moatmarginresearch.com/moat-screener/). For another order book and where its work is done, see our piece on Welspun Corp (\[C\]). For a different company where EBITDA and profit told different stories, see E2E Networks (\[D\]). ## Close: back to CarbonLite CarbonLite Solutions took ₹11,440 crore of orders against ₹370 crore a year ago, and is booking its revenue at a 5.8% margin. The company calls those jobs early-stage. That is the part of the ₹8,53,514 crore order book that the next quarters will show us, and the filings do not say when. ## Sources - **\[A\]** [Larsen & Toubro, results, press release and review reports, 27 Oct 2026](https://nsearchives.nseindia.com/corporate/PAM%5F27102026171156%5FLTSep2026.pdf) (NSE) - **\[B\]** [Larsen & Toubro, analyst presentation Q2 / H1 FY27](https://nsearchives.nseindia.com/corporate/PAM%5F27102026183653%5FAnalystPresentationSep2026.pdf) (NSE) - **\[C\]** [Welspun Corp: The Order Book Moved to Arkansas](https://www.moatmarginresearch.com/welspun-corp-us-mill-order-book/) - **\[D\]** [E2E Networks piece](https://www.moatmarginresearch.com/e2e-networks-gpu-cloud-machine-cost/) - **\[E\]** [Moat Screener](https://www.moatmarginresearch.com/moat-screener/) and [How MoatSCORE works](https://www.moatmarginresearch.com/moatscore/) - **\[F\]** [Larsen & Toubro moat page](https://www.moatmarginresearch.com/larsen-and-toubro-moat/) --- > Educational research, not investment advice. Every figure above is drawn from Larsen & Toubro's own filings, read from the primary documents on 28 October 2026; derived figures are our arithmetic, labelled as such. MoatSCORE read live from the Moat Screener on 28 October 2026\. No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.