Leveraging Engineering Expertise and Government Incentives to Tap Into India’s Growing Electronics Market
Larsen & Toubro (L&T), one of India’s leading engineering and construction conglomerates, is considering a strategic foray into the electronics manufacturing sector. As of 10:30 AM IST on Wednesday, October 29, 2025, industry sources and company insiders have revealed that L&T is evaluating opportunities to diversify its portfolio, capitalizing on its robust engineering capabilities and the Indian government’s push for domestic manufacturing under the “Make in India” initiative. This move comes at a time when India’s electronics market is projected to reach $300 billion by 2026, driven by demand for smartphones, consumer electronics, and semiconductors. L&T’s potential entry could position it as a key player in this high-growth industry.
Strategic Rationale: Tapping a Booming Market
L&T’s decision to explore electronics manufacturing aligns with its long-standing expertise in heavy engineering, infrastructure, and technology-driven projects. The company, which already has a presence in IT services and defense electronics, sees an opportunity to expand into consumer and industrial electronics. Sources indicate that L&T is studying the feasibility of manufacturing components such as printed circuit boards (PCBs), electronic assemblies, and potentially even semiconductor packaging, leveraging its existing manufacturing infrastructure.
The Indian government’s Production Linked Incentive (PLI) scheme, offering subsidies of up to 4-6% on incremental sales, is a significant driver. With global companies like Apple and Samsung shifting production bases to India, L&T aims to collaborate with these players as a contract manufacturer or develop its own product lines. The company’s chairman, S.N. Subrahmanyan, hinted at this diversification during a recent analyst call, stating, “We are exploring adjacent sectors where our engineering prowess can create value.”
Market Context: A $300 Billion Opportunity
India’s electronics manufacturing sector has witnessed exponential growth, fueled by a rising middle class, increasing digitalization, and government policies. According to the India Electronics and Semiconductor Association (IESA), the market is expected to grow from $155 billion in 2023 to $300 billion by 2026, with a compound annual growth rate (CAGR) of 25%. However, the country currently imports over 60% of its electronic components, highlighting the need for domestic production.
L&T’s entry could address this gap, especially in areas like 5G equipment, IoT devices, and electric vehicle (EV) electronics, where demand is surging. The company’s experience in defense manufacturing, including radar and avionics systems, provides a strong foundation to scale into commercial electronics. Analysts suggest that L&T could initially target a $1-2 billion revenue stream within five years, contingent on partnerships and capital investment.
Challenges and Opportunities
While the opportunity is immense, L&T faces challenges such as high initial capital expenditure, competition from established players like Dixon Technologies and Foxconn, and the need for skilled labor. The company may need to invest ₹5,000-7,000 crore over the next three years to set up manufacturing units, particularly in states like Tamil Nadu and Karnataka, which offer robust electronics ecosystems.
On the opportunity side, government incentives, a skilled workforce, and L&T’s existing supply chain network provide a competitive edge. Collaborations with global tech giants and local startups could accelerate product development. Industry experts believe that L&T’s entry could also spur innovation, potentially leading to indigenous electronic designs tailored for Indian conditions.
Next Steps and Market Impact
L&T is expected to finalize its strategy by early 2026, with a pilot project possibly starting in mid-2026. The company plans to conduct a detailed feasibility study and seek partnerships over the next few months. If successful, this move could create thousands of jobs and reduce India’s reliance on imports, aligning with the “Atmanirbhar Bharat” vision.
The stock market has reacted positively, with L&T shares gaining 1.5% to ₹3,850 on the BSE as of 10:30 AM IST today, reflecting investor confidence. Analysts from Kotak Securities noted, “L&T’s diversification into electronics could enhance its valuation multiples, given the sector’s high growth trajectory.”
Conclusion
L&T’s potential entry into electronics manufacturing marks a significant pivot for the conglomerate, leveraging its engineering legacy to tap into a burgeoning market. With government support and a clear focus on innovation, this move could transform L&T into a diversified industrial powerhouse. Investors and industry watchers will keenly observe the next steps, as this could set a precedent for other Indian firms to explore high-tech manufacturing. The journey ahead promises both challenges and opportunities, shaping India’s role in the global electronics landscape.
