L&T's 5% drop an overreaction but the Middle East risk is real, says Sumit Kishore of Axis Capital

With Larsen & Toubro shares taking a sharp hit on Middle East exposure fears, one analyst says it is too early to cut earnings estimates — but warns that a prolonged conflict could change that calculus entirely.

Larsen & Toubro, India's largest engineering and construction conglomerate, found itself squarely in the market's crosshairs as tensions in the Middle East escalated, with its stock falling nearly 5% in a single session. For Sumit Kishore, Executive Director at Axis Capital, the sell-off is understandable — but probably premature.

The exposure is real and substantial

Kishore is not dismissing the concern. The numbers make clear why investors are nervous.


As of December 2025, L&T carried an order backlog of approximately $80 billion. Of that, 49% was overseas, with 37% concentrated specifically in the Middle East. Breaking down the company's FY25 consolidated revenue of roughly ₹1,280 billion, Saudi Arabia alone accounted for 24%, with UAE contributing 4%, Qatar 2%, and Kuwait and Oman 1% each.

The sectoral concentration adds another layer of risk. L&T's Middle East business is heavily weighted toward hydrocarbons, transmission and distribution infrastructure, and solar EPC — precisely the categories most sensitive to regional instability and disruption in the movement of workers and materials.

"If the current conflict in the Middle East gets prolonged, then there could be disruption in movement of men and materials and execution could certainly be impacted," Kishore told ET Now. "I think that worry is getting reflected in today's stock price correction."

He was speaking, notably, from Dubai — where his own flight back to Mumbai had been cancelled, lending a certain immediacy to his assessment of the disruption risk.

Why it is still too early to panic

Despite the legitimate concerns, Kishore is holding his earnings estimates steady for now, and his reasoning is methodical.

First, L&T's project footprint across the Middle East is not concentrated in a single location. Sites are spread across multiple countries and across numerous locations within each of those geographies — meaning a localised disruption is unlikely to simultaneously impair the entire portfolio.

Second, the company's near-term order pipeline remains exceptionally strong. L&T's order book grew 30% as of December 2025, and order prospects for the fourth quarter alone are estimated at nearly ₹6 trillion. Even if some slippage occurs, the structural position remains robust.

"It has been only a couple of days into this conflict," Kishore noted. "I do not think there is any reason to panic and cut estimates right now."

The Lakshya catalyst ahead

Perhaps the most compelling reason for longer-term investors to look through the near-term noise is what L&T has scheduled for May. Alongside its fourth quarter results, the company is expected to unveil its next five-year strategic plan — internally known as the Lakshya plan — which will outline growth targets for its order book and revenues, alongside capital allocation signals for emerging sectors including green hydrogen and semiconductors.

These announcements, Kishore suggests, could serve as a significant positive sentiment catalyst, redirecting attention from near-term execution risks toward the company's longer-term structural ambitions.

"If this is a temporary phenomenon, there is a good opportunity to look at L&T," he said.

The caveat that cannot be ignored

Kishore is careful not to paper over the downside scenario. If the conflict deepens and drags on, the conversation changes materially. A prolonged disruption to L&T's Middle East operations — which represent the largest single geographic concentration in its order book — would inevitably force a rethink of execution timelines and earnings projections.

"We are talking about a whole different discussion for the markets in general," he acknowledged, if that scenario were to unfold.

For now, however, his base case is that this remains a near-term headwind rather than a structural threat — and that investors with a genuine long-term horizon may find that today's 5% drop opens a window rather than signals a warning.

The situation, he stressed, will be watched closely. But the knife has not yet fallen far enough to justify calling it a buying emergency — or a reason to abandon one of India's most consequential infrastructure stories.