Mumbai | September 29, 2025 — eBharat Markets Desk
Filed on Sep 29, 2025, 15:40 IST via BSE.
Engineering major Larsen & Toubro (L&T) said it has tied up a USD 700 million sustainability-linked trade facility (SLTF) with Standard Chartered Bank, strengthening its access to foreign-currency working capital while aligning treasury costs with measurable environmental, social and governance (ESG) outcomes.
According to the exchange filing, the multi-product facility will be available for letters of credit (LCs), bank guarantees (BGs), import/export financing and other trade instruments that support L&T’s projects in India and overseas. As a sustainability-linked structure, the interest margin and/or fees are calibrated to the company’s performance on pre-agreed ESG KPIs—typically metrics such as greenhouse-gas intensity, renewable-power usage, water efficiency, safety performance, or supplier ESG due diligence. Meeting—or outperforming—those targets can translate into pricing benefits, while under-performance could trigger step-ups, keeping incentives aligned through the life of the facility.
L&T noted that the arrangement diversifies its funding pool, offers flexible drawdowns across subsidiaries and project verticals, and sits alongside existing rupee and foreign-currency lines. The company runs one of India’s largest order books across EPC, hi-tech manufacturing and services, where access to scalable trade finance is critical for bid security, advance-payment guarantees, imports of plant and equipment, and milestone-linked supplies.
Deal Snapshot
| Metric | Detail |
|---|---|
| Facility Size | USD 700 million |
| Type | Sustainability-linked trade facility (SLTF) |
| Lender | Standard Chartered Bank |
| Use of Proceeds | LCs, BGs, import/export finance & other trade instruments |
| Pricing Mechanism | Linked to achievement of agreed ESG KPIs |
| Currency | USD (with customary hedging at company discretion) |
| Tenor | As per facility documentation (multi-year trade lines) |
Why it matters
- Cost of capital & flexibility: Sustainability-linked pricing provides potential margin savings alongside diversified, scalable trade finance that can be deployed across projects and geographies.
- ESG integration: Tying treasury costs to quantified ESG performance embeds sustainability into day-to-day commercial decisions, extending to supply-chain partners through LCs and BGs.
- Project execution: Large EPC programs face lumpy cash-flow cycles; a sizeable SLTF can smooth working-capital needs for imports, performance guarantees and milestone shipments, supporting timely execution.
- Signal to stakeholders: The facility underscores L&T’s access to global banking relationships and investor-friendly financing formats, often viewed positively by credit counterparties and ESG-focused funds.
What to watch
- Disclosed ESG KPIs & baselines: The specific metrics, verification process and independent assurance framework that will govern pricing.
- Utilisation patterns: Drawdowns across business verticals, average cost versus rupee lines, and hedge coverage in a moving USD/INR environment.
- Impact on margins: Any quantifiable reduction in finance costs or improvement in working-capital efficiency as reported in upcoming quarters.
- Supply-chain reach: Whether supplier onboarding and documentation adopt ESG screening to extend the benefits deeper into L&T’s ecosystem.
Outlook
With capex and infrastructure activity remaining robust, trade finance remains a backbone for EPC working capital. L&T’s USD 700 mn SLTF adds financial headroom while sharpening sustainability incentives. Delivery on the agreed KPIs—and transparent reporting thereof—will determine the facility’s ultimate impact on the company’s cost of funds and ESG trajectory over the medium term.
