L&T Technology Services targets $1.5 bn revenue run rate in FY25

L&T Technology Services (LLTS) posted a sound set of numbers in the fourth quarter and for the whole fiscal (FY24). The company, which reported 17.9 per cent rise in its revenues on constant currency term, is confident of sustaining the momentum. The engineering services company has given a revenue growth (organic) forecast of 8-10 per cent for FY25, which is higher than last fiscal. In an interaction with the Bizz Buzz, LTTS’ CEO & MD, Amit Chadha said that the company would achieve $1.5 billion revenue run rate in FY25.

The L&T Group company also announced restructuring of the company in order to gain market share. Chadha said the new structure would help the company to get closer to the client and accelerate its revenue growth. He also said that there would be no leadership churn due to the restructuring as all leaders are fairly excited about the new scheme of things. In terms of market share, he said that the company is gaining market share. LTTS, which saw its headcount increasing by 1,500 people in FY24 YoY basis, is planning to add 500 people in the first quarter of FY25. Chadha also said that company’s deal pipeline remained robust

Can you provide a brief overview about the performance of L&T Technology Services in the fourth quarter and the whole fiscal (FY24)?

We are at $305 million of revenues in Q4, which is 5.1 per cent of sequential growth. We committed for 17.5 per cent to 18.5 per cent of revenue growth and we ended with 17.9 per cent (of revenue growth in constant currency terms). Two years back, we were at Rs 1,000 crore of net profit and now, we are at Rs 1,300 crore of net profit. We had signed a $100 million deal with Maharashtra State Cyber Department last quarter. We had also signed two $30 million deals with auto companies apart from winning other major deals during last fiscal year. We had added four clients in $30 million bucket. Our TCV (total contract value) is at a record high and in large deal aspect, we have made significant progress.

For accelerating the growth further, we are restructuring the company into three segments. Going forward, we will be known for mobility, sustainability and hi-tech. With this, decision-making gets faster and we get closer to the customer. We will be able to capture more market share and drive further growth in coming quarters. That said, we are guiding for 8-10 per cent (organic growth) for FY25. We are reiterating our aspiration of touching $1.5 billion revenue run rate in FY25.

What is your aspiration in terms of operating margin going ahead? Can you throw some light on this aspect?

We have had one of our best quarters in the recent past with broad based growth and traction in large deals. As we move past the $1.2 billion revenue run rate and into the next phase of growth, we will be making investments in areas such as mobility, AI & Hi-Tech and Digital Manufacturing solutions. A higher rate of growth will also benefit LTTS’ EBIT margins, and we are aspiring to achieve EBIT margins in the 16 per cent plus range, underscoring our commitment to operational excellence and financial strength.

What is the rationale behind restructuring of the organisation? What kinds of benefits LTTS will derive from such restructuring?

If you see, the design cycles are coming down to three years and clients are looking for targeted offerings than generic ones. So, to provide such targeted offerings and to make sure we provide very clear domain solutions, we have decided to focus on three segments. Also, we believe that there is so much of cross leverage. Therefore, this three by three structure will help us in getting much closer to the customer. It will allow us to go deeper and make decisions faster. We will also be able to build solutions faster for our clients. This will help us in gaining market share and grow faster.

What kind of leadership churn one should expect from restructuring at the company?

No, absolutely not. We have actually promoted everybody within the organisation. We have been planning for this for a long time. We have already internally promoted and leveraged people. We believe that this will help us in unlocking a lot of values. We have always said that we have strong leadership bench and we have leveraged that.

We have done this in the past. We have spent quite a lot of time in this process. We met with our leadership team recently and I am personally being involved in the whole process. We can say that our leaders are very excited.

LTTS won a big deal worth $100 million from Maharashtra State Cyber Department last fiscal. Does it mean that the company’ focus on India as a market is rising? Should we see many more such deals from India in coming quarters?

We are going to execute a first-of-a kind project taking global partnership. We are going to build advanced cyber intelligence in digital forensics solution. We will then architect and set up highly sophisticated cyber intelligence centre under which 25 command centres will be set up. All the emerging technologies including AI and ML are getting leveraged in this process. So, we can leverage such solutions in many other places. As far as revenue accretion is concerned from this contract, we don’t provide specific deal details.

Can you provide some views on LTTS’ deal pipeline? Do you see project ramp ups for all these deals in the current financial year?

We have won significant number of deals in the last financial year. If you look at the entire fiscal year, we have closed 25 deals that are more than $10 million. It includes one deal worth $100 million, there are three deals that are between $30-50 million, nine deals in $15-20 million and three empanelment. So, we are fairly pleased what we have achieved. Our DSO (Days Sales Outstanding) has come down.

LTTS saw its headcount increasing in the last financial year. What are your views in terms of employee addition during the current fiscal year?

Our attrition has come down in the last fiscal. Our headcount increased by 1,500 year-on-year basis. In the first quarter, we are planning to add around 500 employees. Going ahead, employee addition will depend on the demand environment.

Can you give some view on the kind of Gen AI deals that LTTS is winning? Is it possible to state those in monetary terms?

We have trained 3,500 people in Gen AI skills. We have filed 54 unique patents. We have tie-ups in industry-specific solutions with GCP, AWS and Azure. We have tie-ups done with Qualcomm, Intel and Nvidia. We are ready as we see more and more projects are coming (each quarter). We have got 100 PoCs (proof of concepts) running out of which half are paid by clients.