West Asia Risk Tests India Inc

For L&T And Peers, A Lucrative West Asia Market Turns Risky

By Amritha Pillay

What?

Since the start of 2024, analysts have voiced growing concerns about the high exposure of Indian engineering firms to a single export market — West Asia. 

The ongoing regional conflict that began in February is now putting the resilience of Indian engineering and capital goods companies to a dual test — their ability to secure new orders in the immediate term and their capacity to protect future revenue.

For the last three to four years, West Asia — and the GCC in particular — has served as a darling market for Indian engineering and capital goods firms. Driven by oil wealth and an ambition to transition toward a green economy, these nations have been awarding multi-billion-dollar contracts to global firms, including those based in India.

However, the war has brought this period of rapid expansion to an abrupt halt. 

For Indian firms, some of which maintain exposure as high as 37% of future revenue, the situation has evolved into a significant test of corporate resilience.

Signs of stress are already emerging. Analysts at Motilal Oswal noted the capital goods sector is projected to report the first quarter of earnings decline since 3QFY21 (December 2020 ended quarter) of 6% YoY. That was the peak of the pandemic, having slowed down industrial activity across the globe. 

Why? 

This projected downturn is attributed to operational disruptions caused by energy shortages within India or direct project exposure to the volatile Gulf region. Indian firms are already looking for alternative markets to diversify. 

The immediate casualty of the US-Israel-Iran conflict has been the receipt of new orders. 

A scan of company announcements and business intelligence tracking firms in West Asia reveals that no major new contracts have been awarded during this period.

State-linked oil giants, including Saudi Aramco and Qatar Energy — major sources of high-value orders — have reportedly suffered damage of varying magnitudes across at least one of their respective sites.

Prashant Vasisht, Senior Vice President and Co-Group Head of Corporate Ratings at ICRA Ltd, provided a nuanced perspective on these shifting order trends.

“New order inflows for capital goods companies with a sizable exposure to West Asia could be temporarily impacted due to the delay in finalisation of infra projects and deferment of public/ private capex in the region,” said Prashant Vasisht, senior vice president and co-group head, Corporate Ratings, ICRA Ltd. 

The current lack of orders in March 2026 stands in contrast to the industry's prior expectations.  

Some firms are already looking to diversify. While alternative export markets exist, the reason these firms flocked to West Asia was the scale and volume it promised.

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Geopolitics. Active conflict. Commodity shocks. Sentiment swings.

The forces reshaping markets in 2026 go well beyond economics and the rules of strategic decision-making are being rewritten in real time.

The Core and EDGE Community invite a select group of senior leaders, founders, and investors to an closed-door conversation on navigating uncertainty led by financial journalist, Govindraj Ethiraj.

Limited seats. By invitation only.

1.9 million sq. ft.

That’s the volume of retail real estate leasing recorded in India between January and March (Q1) 2026, reflecting steady demand despite a volatile global backdrop, according to a CBRE report titled ‘India Market Monitor Q1 2026.

Trigger: Stable domestic consumption and economic activity continued to support leasing momentum across key urban markets. Demand remained highly concentrated, with Delhi NCR, Chennai, and Bengaluru accounting for over 75% of total absorption.

Supply additions were relatively modest at around 0.9 million sq ft, led by projects such as Felix Plaza and DLF Midtown Plaza in Delhi-NCR. 20.7 million sq ft office leasing is recorded in India during January–March (Q1) 2026, signalling sustained demand across key commercial markets.

GCCs accounted for a dominant 44% of total absorption, underscoring their growing role in India’s office demand story. New supply additions remained measured, with completions at around 10.3 million sq ft, helping keep vacancy levels in check even as demand stayed strong.

What’s Next: With limited new supply and demand clustering in top cities, leasing activity is expected to remain stable, though future growth will depend on faster project completions and broader geographic diversification.

Truckers Brace For Diesel Shock

India's truck fleet operators are now bracing for fuel rationing and a likely diesel price hike, as supply strains from the West Asia conflict begin to bite, Bloomberg reported.

Backdrop: Industry groups told Bloomberg that informal rationing was already underway, with discounts withdrawn and nearly 10% of fleets idled. A price increase by state-run refiners, expected after key elections, could push that figure to 30%, raising freight costs across an economy where trucks move about 70% of cargo.

Setting: The pressure stems from a fragile ceasefire between the US and Iran, now at risk after a cargo ship seizure and stalled talks, Reuters reported. Tehran has said it refuses to join peace talks. Oil prices have jumped nearly 5%, with Brent nearing $95 a barrel. This comes as Iran has said, according to Associated Press, that the conflict has already claimed over 3,300 lives in the country alone.

Drone Bribe Crackdown

The Central Bureau of Investigation arrested two officials from the Directorate General of Civil Aviation, India’s aviation regulator, along with a representative linked to Reliance Industries Limited, in connection with a bribery probe tied to drone approvals, Reuters reported.

The Scoop: The arrests stem from an ongoing investigation into alleged bribery linked to regulatory approvals. India’s anti-corruption agency, the Central Bureau of Investigation, is probing whether officials from the Directorate General of Civil Aviation accepted bribes in exchange for extending regulatory favours to a Reliance-backed drone unit. The case centres on claims that clearances and compliance-related approvals were influenced through illicit payments.

Implications: The investigation is still unfolding, and more scrutiny is likely on how drone-related permissions are granted in India. Depending on findings, the case could tighten oversight in the fast-growing unmanned aviation space and raise compliance expectations for companies operating in the sector.

Gold Rally Dulls Festive Shine

India’s gold buying during Akshaya Tritiya saw a sharp slowdown this year, with volumes dropping despite the auspicious demand typically associated with the festival.

Catch Up Quick: Purchases fell nearly 30% in volume terms as gold prices surged close to record highs, deterring consumers from making large jewellery buys, even as overall spending held up in value terms, reported The Economic Times.

How We Got Here: Elevated prices, over 63% since last Akshay Tritiya, have shifted buying behaviour, with consumers opting for smaller quantities, coins, or delaying purchases altogether.

While jewellers offered discounts and promotions, demand remained tepid across most regions, though southern markets fared slightly better, reported Reuters. The trend underscores a broader shift, with buyers increasingly timing purchases around price dips rather than festival-driven buying, weakening the traditional demand cycle.

CCI Fast-Tracks Apple Case

iPhone maker Apple has failed to submit key financial data sought by the Competition Commission of India, prompting the watchdog to fast-track penalty proceedings to a final hearing next month, Reuters reported.

Trigger: The CCI said the company has not provided financial disclosures or responded to findings since October 2024, instead pointing to a pending challenge before the Delhi High Court against India’s antitrust penalty framework, according to documents reviewed by Reuters.

Context: The regulator requires such data to determine fines after reportedly finding Apple abused its dominant position in the iPhone apps market. Apple has denied wrongdoing and warned penalties could reach $38 billion if global turnover is considered. The case now moves toward a final decision, signalling a more aggressive enforcement stance by Indian regulators.

The Markets are Back on Standby

On Episode 852 of The Core Report, financial journalist Govindraj Ethiraj talks to Amit Goel, Co-founder & Chief Global Strategist at PACE 360 as well as Dharmesh Trivedi, Founder at Dharmesh L Trivedi & Co. and Founding Member at PEVC CFO Association.

• The markets are back on standby as negotiations between the US and Iran are held off

• The RBI is easing rupee derivatives after cracking down on them

• What can we take away from the way gold prices have moved in the last two months?

• Why is the RBI wanting AIFs registered in the GIFT City to be treated as Indian residents?