From tunnel boring machines to rockets and pod taxis, L&T explores new manufacturing bets
MUMBAI: Larsen and Toubro Ltd (L&T) is looking to expand beyond building infrastructure projects and become a bigger manufacturer, exploring at least half a dozen new businesses ranging from nuclear fuel rods and tunnel boring machines to rockets and drones and their components. The move is aimed at diversifying a business still heavily dependent on project execution, as the company approaches ₹3 trillion in annual revenue and seeks to sustain growth of 12-15%.
The Mumbai-based engineering and construction major is also evaluating opportunities in pod taxis, battery energy storage systems (BESS), traction motors for electric vehicles, and prefabricated residential units, including modular bedrooms and bathrooms that can be installed at construction sites to speed up building, company executives said.
These prospective businesses would add to L&T's existing manufacturing portfolio, which spans defence equipment such as howitzers, rocket launchers, warships and the upcoming Zorawar tank, as well as industrial valves, construction equipment and electrolyzers. The manufacturing and products segment accounted for 6% of the company's ₹1.47 trillion revenue in the first half of fiscal year 2027 (FY27), according to the L&T's latest investor presentation.
“Our portfolio is very project overweight,” R. Shankar Raman, L&T’s president and whole-time director for finance, had said during a media interaction on 28 October.
He said technology and financial services have helped reduce the company's dependence on project-led businesses, but the portfolio remained skewed. L&T wants to at least double the contribution of manufacturing to its business, Shankar Raman added.
A spokesperson for L&T confirmed that the company was evaluating opportunities to manufacture drones, battery energy storage systems (BESS), rocket components, tunnel boring machines and electric vehicle (EV) motors. The spokesperson did not comment on whether nuclear fuel rods, pod taxis or complete rockets were also under consideration.
New manufacturing bets
Several opportunities are linked to anticipated policy changes and emerging demand. L&T expects the entry of private players into India's nuclear energy sector under the new nuclear energy law to create a shortage of nuclear fuel rods, which are thin metal tubes packed with small pellets of nuclear fuel. The company sees this as a potential manufacturing opportunity.
It is also considering making rockets for satellite launches as the government opens up the space sector to private participation. The government is reportedly considering transferring Indian Space Research Organisation (Isro) technology to private players for manufacturing.
Pod taxis, small vehicles designed to carry a handful of passengers on dedicated tracks, are another possibility. The Maharashtra government is planning India's first pod taxi system in Mumbai's Bandra Kurla Complex business district. However, the project has been awarded to Hyderabad-based Sai Green Mobility Pvt. Ltd.
L&T is also developing a prototype tunnel boring machine, which it could eventually manufacture at scale for its own projects as well as for sale to other companies.
“If India is going to build more and more networks underground because the overground is populated, then tunnel borers are required, both for us and for the industry. So, if our experiment proves successful, efficiency-wise and cost-wise, we might source our own tunnel borers plus supply to the market,” Shankar Raman said.
The products under consideration remain at different stages of evaluation and may not all develop into full-fledged businesses.
The margin opportunity
A larger manufacturing business could also improve L&T's profitability. Manufacturing businesses can generate margins upwards of 15%, compared with 8-9% for infrastructure projects, according to Amit Anwani, vice-president and lead analyst for capital goods, industrials and defence at brokerage PL Capital. Margins could be higher in defence and precision engineering, he said.
“Even today, the margins in their current manufacturing businesses are better than their infrastructure segment," he said. "Manufacturing will, however, require higher R&D and engineering skills for product development and investment in manufacturing capacities and capabilities. So these points also need to be kept in mind," he added.
The manufacturing push would mark L&T's fourth major diversification bet, following its expansion into financial services and information technology services.
The company started its lending business more than three decades ago, initially focusing largely on infrastructure and real estate financing. Over the past five years, under its Lakshya 26 plan, L&T Finance Ltd has aggressively pared its wholesale portfolio to pivot towards retail lending.
Its IT business began around the same time as financial services and eventually developed into two separate companies: LTM Ltd and L&T Technology Services Ltd, focused on IT services and engineering research and development (ER&D) services, respectively.
Together, the financial services and technology businesses accounted for 29% of L&T's revenue in the first half of FY27. Manufacturing is the next business the company wants to scale as it seeks to reduce the weight of infrastructure projects in its overall portfolio.