Larsen & Toubro shares are drawing attention ahead of the Union Budget presentation, as the engineering conglomerate's performance serves as a key barometer for India's infrastructure and industrial sectors. The company's significant presence across construction, energy, and technology projects makes its capex plans and order book trends crucial indicators for the sector's growth trajectory.

CFO Projects 10% Capex Growth

Larsen & Toubro's Chief Financial Officer R Shankar Raman is anticipating a 10% increase in capital expenditure outgo in the upcoming budget for FY27. Speaking to PTI, Raman expressed confidence in the government's spending plans, stating: "They will possibly go for a 10 per cent increase...that is what I am anticipating, but that's at a personal level."

No Resource Crowding Concerns

Despite concerns about sagging private capital expenditure growth, Raman dismissed fears of a 'crowding out' of resources due to high government spending. He emphasized that ample liquidity in the system will support such investments, indicating a positive outlook for infrastructure development. Raman highlighted that there is already a jump in the way large infrastructure projects are getting conceived, underlining that 'infrastructure has miles to go'. This perspective suggests continued opportunities for companies like L&T in the infrastructure space.

Budget 2025 Capex Allocation

The Budget 2025 demonstrated continued emphasis on capital spending with significant allocations for infrastructure development:

The government has been increasing the capex target at a slower pace, considering the medium-term fiscal consolidation path of the central government. However, the consistent upward trajectory in capital expenditure allocation reflects the government's commitment to infrastructure development.

Market Focus on Infrastructure Spending

L&T shares will remain in focus due to the company's direct correlation with government capex outlay and capital expenditure trends. The engineering giant's performance often sets the tone for the broader infrastructure sector, making investor attention on budget announcements particularly significant for the stock's movement.

Larsen & Toubro 's Chief Financial Officer R Shankar Raman has expressed optimism about government capital expenditure in the upcoming budget, anticipating a 10% increase for FY27. Speaking on infrastructure investment priorities, Raman emphasized the critical role of government spending in supporting India's development goals while addressing concerns about private sector investment dynamics.

Budget Expectations and Infrastructure Focus

Raman expects the government to maintain its infrastructure investment momentum, building on the substantial allocation in the current fiscal year. His projections are based on India's long-term development objectives and the government's continued commitment to infrastructure growth.

"If India is to become a developed economy by 2047, infrastructure has a lot of role to play, and I think the government is seized of this. I am hopeful that they will allocate adequate resources in the budget to be able to do that," Raman stated.

Project Execution and Quality Concerns

The CFO highlighted significant challenges in project execution, particularly regarding contractor selection processes. He noted that awarding projects to the lowest bidder often leads to execution delays when contractors lack adequate technical capabilities. However, Raman welcomed recent government recommendations for departments to adopt qualitative-based pricing mechanisms.

Under the new approach, weightage is given to factors beyond cost, including:

• Timely project completion capabilities
• Technical expertise and track record
• Overall execution quality

Raman emphasized that maintaining balance between pricing and execution capabilities will help ensure qualified companies secure contracts, ultimately improving project outcomes.

Manpower Challenges in Construction Sector

The construction industry continues to face persistent manpower shortages, a challenge Larsen & Toubro has been highlighting consistently. Raman identified several factors contributing to this issue:

• Alternative Employment Options: Availability of other job opportunities makes construction less attractive
• Government Employment Schemes: Programs promising up to 125 days of employment discourage workers from relocating
• Pandemic Impact: COVID-19 changed worker mindsets about mobility and proximity to home

Raman suggested that taking projects closer to workers' places of residence could address these challenges, requiring deeper penetration into the country's interior regions.

Private Sector Investment Landscape

Despite concerns about private capital expenditure growth, Raman does not fear resource crowding out due to high government spending. He noted active private sector investments across multiple industries:

• Automobile sector
• Construction equipment
• Steel industry
• Minerals and metals
• Semiconductor manufacturing
• Electronics sector

The CFO praised the government's openness to industry consultation during the budget-making process, calling it a sign of mature governance that considers stakeholder input in policy formulation.

Outlook for Infrastructure Development

Raman observed a significant increase in the conception of large infrastructure projects, noting that "infrastructure has miles to go" in India's development journey. The combination of government commitment, adequate liquidity, and systematic improvements in project allocation processes positions the sector for continued growth, supporting the broader economic development objectives.