India’s largest engineering and construction company Larsen & Toubro Ltd. expects its international business to get a boost while domestic market slows, after receiving global credit ratings higher than the sovereign’s.
“This milestone will enable us to bid for more international projects both independently and through joint ventures,” R Shankar Raman, whole-time director and chief financial officer said in an interview last week.Fitch Ratings Inc. assigned the company BBB+ ratings for the first time early this month, two notches higher than the sovereign. S&P Global Ratings gave it a similar ranking in May. That puts L&T together with Reliance Industries Ltd. as the only two Indian firms that have higher global ratings than the sovereign.
But despite the international credit ratings, the company has no immediate plans for offshore fundraising as its operational cash flows are adequate, according to Raman.
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Instead, the move is expected to help the engineering behemoth win greater backing from international banks when bidding for overseas contracts as the domestic business shows signs of slowing.
“We will now intensify engagements with international banks, who will be better positioned to issue bank guarantees and letters of credit, facilitating our access to credit facilities and strengthening our financial obligations,” Raman said.
Middle East Focus
L&T’s international orders have been steadily increasing over the last four years, with the portion in its order book jumping from a quarter in the fiscal year ending March 2020 to 38% in March 2024.
The bulk of international orders are related to renewable energy, urban infrastructure and oil and gas projects in the Middle East, wherein Saudi Arabia, United Arab Emirates, Qatar and Kuwait are the biggest spenders, Raman explained.
One of the largest clients in the region is Saudi Aramco, which is expected to spend between $48 billion to $58 billion on capital expenditure this year. Larsen & Toubro plans to engage more with the world’s biggest oil exporter, according to Raman. L&T aims to win a share of 10% of Saudi Aramco’s annual spending every year, he added.
Shares of L&T are up about 4% this year, compared with a 13% gain in the benchmark NSE Nifty 50 Index.
