Synopsis: L&T will sell Nabha Power to Torrent Power for ₹3,660.87 crore by June 2026. As per CLSA, it will likely unlock ~₹26/share and enable a special dividend. The deal supports L&T’s FY26 ROE target of 18%, with surplus cash returned to shareholders.
The shares of the Large-Cap company, specializing in Engineering, Procurement, and Construction (EPC) projects, Hi-Tech Manufacturing, and Services, are in focus after the sale of Nabha Power to Torrent Power, and let’s also see how the L&T Shareholders Stand to Gain from the Deal.
With a market capitalization of Rs. 5,83,809.53 Crores on the Day’s Trade, the shares of Larsen & Toubro Ltd rose by 1.2 percent, reaching a high of Rs. 4254.00 compared to its previous close of Rs. 4202.10.
What Happened
Larsen & Toubro Ltd, engaged in Engineering, Procurement, and Construction (EPC) projects, Hi-Tech Manufacturing, and Services, has recently announced that its wholly‑owned subsidiary, L&T Power Development Limited (L&T PDL) has signed a Securities Purchase Agreement to sell its entire 100% stake in Nabha Power Limited (NPL) to Torrent Power Limited for Rs. 3,660.87 crore. The transaction is expected to be completed on or before June 30, 2026, after which NPL will no longer be a subsidiary of L&T.
CLSA on L&T
The Global brokerage CLSA has reiterated its ‘Outperform’ rating on the stock, with a price target of Rs. 4,842 per share, with an upside potential of 15 percent from the previous day’s close.
CLSA anticipates that the agreement to sell its Nabha Power subsidiary to Torrent Power could unlock approximately Rs. 26 per share in value and may pave the way for a potential special dividend.
The brokerage noted that L&T’s move to divest Nabha Power, a concession with relatively low return on equity, aligns with its stated goal of reaching an 18% ROE by FY26, a target initially set in FY21 when ROE was 9.8%. For FY25, ROE has already risen to 16%, signaling steady progress toward that objective.
CLSA expects the Nabha Power divestment to further boost L&T’s ROE, especially if the surplus cash is returned to shareholders. The deal’s equity value stands at ₹3,660 crore, slightly below the sum-of-the-parts valuation of ₹3,800 crore.
The brokerage noted that some profit booking may appear in the profit and loss statement, given that L&T had previously marked down this investment. Following the exit from Nabha Power, L&T is likely to return surplus capital to shareholders via a special dividend as it continues its push toward the 18% ROE target for FY26.
Financials
The company’s revenue rose by 10.49 percent from Rs. 64,668 crores in December 2024 to Rs. 71,450 crores in December 2025. Meanwhile, Net profit declined from Rs. 3,974 crores to Rs. 3,825 crores in the same period.
The company demonstrates strong financial performance, with a Return on Capital Employed (ROCE) of 14.5% and a Return on Equity (ROE) of 16.6%, indicating efficient utilization of capital and equity to generate profits. Coupled with a consistent dividend payout ratio of 33%, the company balances rewarding shareholders while retaining earnings for growth, reflecting both profitability and prudent financial management.
As of 31-Dec-25, the company’s order book reached Rs. 7,332 bn, up 30% year-on-year from Rs. 5,642 bn, with domestic orders at Rs. 3,763 bn and international orders at Rs. 3,569 bn, representing 49% of the total. This growth reflects robust domestic ordering momentum and a record quarterly order inflow of Rs. 1,356 bn, marking a 17% increase YoY.
The near-term outlook remains strong, supported by a healthy prospect pipeline of approximately Rs. 5.9 trn. The balanced mix of domestic and international orders positions the company well for sustained growth in both markets.
As of 31-Dec-2025, the company’s order book is led by the Infrastructure segment, which accounts for 58%, followed by Energy at 34%, Hi-Tech Manufacturing at 5%, and other segments contributing 3%.
Geographically, 51% of the order book comes from India, 37% from the Middle East, and the remaining 12% from the Rest of the World (ROW). This balanced distribution highlights the company’s strong domestic base alongside a significant international presence.
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