West Asia tensions rattle capital goods stocks; L&T, KEC slide

ET Intelligence Group: The stocks of engineering and capital goods companies having exposure to the West Asia are under pressure since February 27 amid the conflict between Iran and Israel. The BSE Capital Goods index has fallen by nearly 4% in three trading sessions to March 04, driven by concerns over possible cancellations of projects in the region that may shrink the order book and limit the revenue visibility or delays in order execution thereby eroding profitability. Among these stocks, Larsen and Toubro has fallen sharply by over 9% in the said period given its significant exposure to the West Asia countries. As of December 2025, the company had an outstanding order book worth ‘7.3 lakh crore. Of this, ‘2.7 lakh crore or 37% was from West Asia compared with 21% three years ago. In addition, the region accounted for 76% of the international orders in the latest December quarter. Over the past three years, size of the order book from the region has grown at a faster rate. Between December 2022 and December 2025, the West Asia order book grew at a compounded annual growth rate (CAGR) of 49.5% compared with 23.8% for the total order book.

In West Asia, L&T has major contracts in Saudi Arabia in areas including hydrocarbons and power transmission and distribution. “While it is difficult to assess the current situation, we estimate that L&T’s core earnings will be negatively impacted by 11-12% for FY27 and FY28, assuming a three-month execution delay and low order inflow mainly in the hydrocarbon segment,” mentioned Emkay Global Financial Services in a report.

KEC International is another company likely to be affected by the conflict as it draws an estimated 20% of its nearly ‘37,000 crore worth of outstanding order book from the region. According to Emkay, KEC’s factories in the United Arab Emirates (UAE) are shut amid the conflict, implying a revenue hit of ’50 crore per day. Assuming a three-month delay in execution, the broking firm estimates 3-4% hit on earnings for FY27 and FY28. KEC’s stock has lost nearly 9% since February 26.

In the case of Kalpataru Projects International, the impact is expected to be limited since its current project in the region is in the final stage. The company has bid for five projects in the region as of December and their awarding may be delayed due to the current situation thereby reducing revenue visibility.

Among other companies, Engineers India (EIL) has exposure to West Asian markets with consultancy assignments. “Escalation in regional tensions could delay fresh project awards, elongate tender finalization timelines, and moderate consultancy inflows in the near term,” stated PL Capital in a report. The stock has lost nearly 9% in the past three trading sessions.