Larsen & Toubro Ltd (L&T) is reshaping its strategy in new-age sectors, betting that owning and operating assets could deliver higher returns than building them for others. According to reports from Mint, the Mumbai-headquartered conglomerate has committed capital to data centres, green hydrogen production and electronics manufacturing over the past two to three years, marking a selective reversal of its long-standing asset-light strategy. Instead of merely building infrastructure for customers and handing over the assets, the company plans to own some of these facilities and earn revenue from the products and services they generate—from computing capacity and AI and cloud services to green molecules and electronics. This strategic pivot is evident in the company's recent investments, including an electronics manufacturing plant in Tamil Nadu's Coimbatore that will provide contract manufacturing services and produce automotive components.
Among its recent large capital investments is an electronics manufacturing plant in Tamil Nadu's Coimbatore that will provide contract manufacturing services and produce automotive components. The business was announced in April and will be housed under L&T Electronic Products & Systems. Similarly, L&T Vyoma operates two data centres with a capacity of 32 megawatt (MW). In January, it broke ground on another 100MW facility in Navi Mumbai, and also has a fourth facility being built in Whitefield, Bengaluru—with a total 200MW in planned additional capacity. Additionally, L&T Energy Greentech is building a 10,000 tonnes-per-year green hydrogen plant for Indian Oil Corp. Ltd's Panipat, Haryana, facility, where it will own the asset and sell the gas to the oil marketing company. The company's approach reflects a significant departure from its traditional asset-light model, where it previously exited conventional infrastructure assets such as roads, metro rail projects, power plants and power transmission lines due to lower returns.
The strategy of selectively owning assets marks a significant departure from the strategy L&T adopted a decade ago. In its 2016 five-year strategic plan titled 'Lakshya 2021', it decided to exit asset ownership in conventional infrastructure assets such as roads, metro rail projects, power plants and power transmission lines due to lower returns on investments. It has since divested from its portfolio of road assets, a thermal power plant in Punjab, a metro rail project in Hyderabad, and an electrical switchgear manufacturing business, among others. According to Anup Sahay, head of corporate strategy and special initiatives at L&T, when its infrastructure projects failed to deliver returns in line with its aspirations, it divested them to maintain a strong balance sheet. The current investments in data centres and AI infrastructure, in green hydrogen and electronics, are of high value and amenable to investment in a calibrated manner. As Sahay noted, there is a change in the direction of investments, calling it a calibrated, demand-led approach rather than a blanket strategy shift.
The pivot was imperative for L&T to sustain its growth rate at its already behemoth-sized scale, according to Amit Anwani, vice-president and lead analyst for capital goods, industrials and defence at brokerage PL Capital. The company reported a top line of ₹2.9 trillion, and booked fresh orders worth ₹4.4 trillion in FY26. Its total order book stood at ₹7.4 trillion at the end of FY26, and stands at ₹7.8 trillion currently. L&T reported 16.6% return on equity in FY26, excluding one-time cost impacts, according to the company's investor presentation. Analysts see the logic behind this strategic shift, as margins in these businesses come from operating them, not just building them, unlike the conventional infrastructure assets that L&T previously exited.
Even among newer businesses, the company has been choosy about where it will own assets. For instance, it has entered electronics manufacturing and semiconductor design, but it has stopped short of manufacturing semiconductors. Similarly, it will own green ammonia plants, but it has stayed clear of asset ownership in the rest of the renewable-energy ecosystem. L&T builds solar plants, battery energy storage systems, pumped hydro storage plants and factories for others, but it will not own any of these assets. According to Sanchit Vir Gogia, founder and chief executive of independent technology analysis and consultancy firm Greyhound Research, L&T is not abandoning capital discipline. Its practice is to build a capital-heavy business, prove it, and structure it for the next owner, following the pattern of cement going to Grasim in 2004 and road concessions to an infrastructure fund in 2024.
