- L&T Tech, one of the IT services subsidiaries of the conglomerate L&T, announced it had annualized revenue of $1 billion in the second quarter.
- At a time when
moonlightis causing a heated debate in the IT sector, L&T Tech says it’s fine as long as it’s not related to the primary job.
- The IT services company also signed a 5-year multi-million dollar deal from automaker BMW and said it expects its bookings in Europe to double in FY23.
- https://londonbusinessblog.com/ India spoke with the company’s CFO Rajeev Gupta and COO Abhishek Sinha to understand what the future holds for L&T Tech.
At a time when moonlight has become a hot-button debate in India’s IT sector and majors like TCS, Infosys and Wipro have said they oppose it, IT services firm L&T Tech revealed it’s fine with moonlight as long as the second. job is not related.
L&T Technology Services, the IT arm of multinational conglomerate L&T, released September quarterly results, reporting 4.5% sequential growth in revenue at constant exchange rates, while net profit rose 2.9% during the quarter to 282 crore.
However, the company’s shares fell 3.8% on Wednesday, while the Nifty IT index fell 0.4% as of 10:30 a.m.
While the company raised its outlook for FY23 to 15.5-16.5% revenue growth from 13.5-15.5%, it also reported that employee turnover deteriorated to 23.2%, with a net headcount increase of 572 for the quarter. from Sept.
The company also announced that it has reached its goal of $1 billion in annual revenue, which it had initially expected to happen sometime in the second or third quarter of this year.
https://londonbusinessblog.com/ India spoke with Rajeev Gupta, CFO, and Abhishek Sinha, COO, L&T Tech, to understand what’s working for the company and the outlook for the coming quarters.
Moonlighting is fine, as long as it has nothing to do with it
Moonlighting has been a touchy subject in recent weeks, with most IT majors actively discouraging or expressing their disapproval. The only notable exception was Tech Mahindra, who said it’s okay with the practice.
Sinha, however, took a more nuanced stance. While he says the company is against the practice, he’s fine with the second job having nothing to do with what the employees are doing at the company.
“I mean, if an engineer wants to teach students and go to university after office hours or do CSR work or do work that is unrelated to the work we do for clients, there’s nothing wrong with that. In fact, we would encourage that and that’s absolutely fine,” Sinha explained of the company’s stance on moonlight.
Moonlighting is the practice of taking a second job, usually in secret, in addition to the primary full-time job.
About churn rates – ‘it’s a cyclical problem’
In the September quarter, several headwinds intensified for the Indian IT sector – from recession concerns to high turnover and high wages, the past few months have been difficult for the IT majors.
But crucially, L&T Tech’s turnover has deteriorated, from 20.4% in the previous quarter to 23.2% in the second quarter. Sinha said this is a cyclical issue and he sees it waning in the next quarter.
Despite the pressure on margins that can cause high churn rates, Gupta sounded optimistic, saying it could turn out to be a tailwind going forward as he expects churn to decline and the company’s EBIT margins in the current environment of 18% managed to manage.
‘Deal pipeline looks robust’
L&T Tech added a new $60 million customer to its list in the second quarter and believes the deal pipeline looks robust — the company says it now has the visibility to double its bookings in Europe in FY23.
Gupta explains how the company has managed to keep its EBIT margins above 18% for the fifth straight quarter: “The pipeline is robust in terms of pricing and I would probably respond to that – more in terms of the six big bets that are being made.” we have and most of the wins we have had have been in these areas, so our ability to command better prizes has been preserved.”
‘Cautiously optimistic’ on growth prospects
Despite warnings from the IMF and World Bank of an impending recession, Gupta says he is “cautiously optimistic” about L&T Tech’s growth prospects.
“Since we are in technical services, we tend to look at customer spending in two areas. One is of course growth related capex and the other is maintenance related capex. Now, for any customer who wants to continue to manage their operations, they will always continue with the maintenance capex. So we believe that regardless of the situation, maintenance spending will continue,” explains Gupta, explaining the rationale behind his optimism.
One of L&T Tech’s main revenue sources is the transportation industry – the company just signed a 5-year multi-million dollar deal from automaker BMW to provide high-end engineering services for the infotainment consoles in its hybrid cars.
Since the transportation industry contributes to more than a third of the company’s total revenue, it is understandable that it is one of the company’s major players.
“EV is a huge wave right now and that’s where our big bet is well positioned and we’re seeing good tailwinds in terms of transportation spending at least in the next 18 months if not more,” Gupta added. .
Sinha said that while the shortage of semiconductor chips is still unresolved, the problem is receding, explaining why the company sees transportation spending — its largest source of revenue — as a tailwind in coming quarters.
L&T Tech reports 4.5% sequential growth in CC revenue in Q2, raises FY23 revenue forecast to 15.5-16.5%
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