Case Study: L&T's Order Book, Understanding Infrastructure Valuation

Larsen & Toubro is the closest thing India has to a listed proxy for the country's capex cycle: roads, metros, power, water, defence, hydrocarbons and more, plus a stable of listed subsidiaries. That breadth also makes it one of the harder Nifty 50 stocks to value. This case study teaches you to analyse L&T the way infrastructure analysts do. Start with the order book: how order inflow, order backlog and revenue connect, what book-to-bill and order book cover tell you about visibility, and how to judge the quality of what sits in the backlog, including the recent surge in Middle East orders. Then follow orders into cash: percentage of completion revenue under Ind AS 115, contract assets, retention money, mobilisation advances and the execution risks hidden in fixed-price contracts. Finally, value the company with a sum of the parts that separates core engineering and construction from LTIMindtree, L&T Technology Services and L&T Finance, and finish with a checklist you can apply to any order-book-driven company on NSE, using annual reports, investor presentations and screener.in.