Larsen & Toubro Maintains Strong Operations in West Asia Despite Regional Tensions
Construction and engineering behemoth Larsen & Toubro (L&T), which has maintained a significant presence in West Asia for over thirty years, has announced that only a minor fraction of its regional projects has been impacted by the ongoing geopolitical crisis. The company's deputy managing director, Subramanian Sarma, clarified that approximately 5% of L&T's projects in the Middle East have been temporarily paused.
Project Pauses Limited to Sensitive Locations
These halted projects are primarily situated near sensitive zones, including military installations and airport areas, with some work suspended at the explicit request of clients. However, Sarma emphasized that this represents a very small portion of the company's overall operations in the region.
"The overwhelming majority, 95% of our projects, are functioning as usual across our 100 sites throughout the Middle East," Sarma stated. "This stability is certainly positive news for our business continuity."
Employee Safety and Regional Workforce Unaffected
L&T has confirmed the safety of all its personnel and their families in the region. The company employs 8,000 individuals directly in West Asia, with an additional 2,000 family members residing there. Furthermore, a substantial contractor workforce of 10,000 to 15,000 people engaged on various L&T projects remains unaffected by the current situation.
The organization is implementing rigorous monitoring protocols, with senior leadership teams stationed locally maintaining constant communication with employees, customers, government authorities, and other stakeholders on a daily basis.
Logistics Emerge as Primary Operational Concern
While operational activities remain largely stable, Sarma identified logistics as a key area of concern. Over the past fortnight, material movement, particularly sea shipments originating from China and Europe, has experienced disruptions, with new consignments yet to be dispatched.
Nevertheless, supplies procured locally within nations such as Saudi Arabia and across Gulf Cooperation Council countries continue uninterrupted, with road transportation proceeding normally.
Proactive Measures to Mitigate Supply Chain Disruptions
To counteract potential logistical challenges, L&T is actively exploring alternative routing strategies. These include utilizing ports in the Red Sea and Oman, followed by overland transport to project sites. The company currently maintains sufficient raw material inventory to sustain operations for two to three months.
"However, a prolonged conflict scenario could introduce supply challenges, especially concerning seaport deliveries," Sarma cautioned.
Financial and Customer Operations Remain Uninterrupted
Despite the regional tensions, customer engagement, invoicing processes, and payment collections continue without disruption. West Asia holds substantial strategic importance for L&T, described by Sarma as a "second home" for the company.
The region contributes approximately one-third of L&T's total inflows, project backlog, and overall revenue. Analysts from foreign brokerage CLSA previously estimated that a potential blockade of the Strait of Hormuz in March could reduce the company's consolidated earnings per share by 1.8%.
Diversified Portfolio and Risk Management Framework
L&T's operations in West Asia encompass a diverse range of sectors including civil construction, hydrocarbons, renewable energy, and data centers. Sarma highlighted that the company has developed a robust risk management framework over years of regional presence.
"As we expanded our West Asia portfolio, we consistently deliberated on managing geopolitical risks," Sarma explained. "Our risk committee and board engaged in extensive discussions. We structured our portfolio through diversification, careful client selection, and strategic deployment of senior leadership in the region—with six or seven senior vice presidents based there. This preparedness is proving instrumental in effectively navigating the current circumstances."
