West Asian crisis disrupts capital goods stocks; L&T, KEC Slide

ET Intelligence Group: Stocks of engineering and capital goods companies focused on West Asia have been under pressure since February 27 amid the conflict between Iran and Israel. BSE’s capital goods index fell nearly 4% in the three trading sessions till March 04, driven by concerns over possible cancellation of projects in the region that could shrink the order book and limit revenue outlook or delay in order execution thereby reducing profitability.

Among these stocks, Larsen & Toubro fell more than 9% during the period, given its significant exposure to the West Asian countries. As of December 2025, the company was valued at Rs 7.3 lakh crore. Of these, 2.7 lakh crore or 37% were from West Asia compared to 21% three years ago. Additionally, the region accounted for 76% of international orders in the last quarter of December. Over the past three years, the size of the order book from the region has grown rapidly. Between 2022 and December 2025, West Asia’s order book grew at a compound annual growth rate (CAGR) of 49.5% compared to 23.8%.

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

KEC International is another company likely to be affected by the dispute as it collects 20% of its significant order book worth around $37,000 billion from the region. According to Emke, KEC’s factories in the United Arab Emirates (UAE) have been closed during the dispute, which has resulted in a daily loss of revenue of 50 billion. Given the three-month delay in execution, the broking firm estimates a 3-4% hit on earnings for FY27 and FY28. KEC stock has lost nearly 9% since February 26.

In the case of Kalpataru Project International, the impact is expected to be limited as the current project in the area is in its final stages. The company has bid for five projects in the region till December and their awarding may be delayed due to the current situation thus reducing the revenue outlook.

Among other companies, Engineers India (EIL) has reached out to West Asian markets with consulting assignments. “An increase in regional tensions could delay new project awards, lengthen the timeline for finalizing bids, and moderate consultation flows in the near term,” PL Capital said in a report. The stock has lost nearly 9% over the past three trading sessions.

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