We Are Cautiously Optimistic About Growth Prospects In FY26: LTTS CEO Amit Chadha

L&T Technology Services reported sound third quarter performance while many of its peers posted weak results during the quarter. The company’s deal wins have improved, while it was able to improve its operating margin despite wage hikes.

In a conversation with the Bizz Buzz, the company’s CEO, Amit Chadha said L&T Technology Services remains optimistic about its growth prospects in FY26. With acquisition of Intelliswift, the company hopes to increase its services offerings and win more deals in the next financial year. Similarly, mobility - which has become a pain area for many players - is likely to see good performance during the fourth quarter of FY25, Chadha said. On the generative AI front, he said that the company is building small LLMs and SLMs for its clients

Can you provide a brief overview about L&T Technology Services (LTTS) performance of third quarter of current financial year? What are the driving factors behind this performance?

We have delivered a good quarter. Our revenue grew 9.5 per cent year on year in rupee terms, 8.7 per cent year on year in constant currency and 3.1 per cent quarter on quarter basis. We are now at $1.3 billion (annual revenue) run rate.

Secondly, tech (vertical) grew at about 11 per cent quarter on quarter and sustainability grew at about 4 per cent. On large deal front, we had the best ever large deal wins in the third quarter. We have won one $50 million, two $35 million, two $25 million, three $10 million large deals across all segments. We still have a huge pipeline and we do believe that our deal wins would remain at a similar level during the fourth quarter of FY25.

We had said earlier that operating margin would be better in the second half of ongoing fiscal than the first half. After taking in margin headwinds of 100 basis points due to salary increments, we were still able to get an operating margin of 16.2 per cent. We expect margin to be on a similar shape in the fourth quarter. So, profits are coming back. Lastly, the acquisition of Intelliswift has been concluded. The fourth quarter numbers would reflect the Intelliswift numbers and therefore, we should be at the upper end of our guidance in constant currency term. So, our revenue growth is likely to be 10 per cent in combining both organic and inorganic growths.

Many experts are of the opinion that 2025 could be a weak year in terms of growth for engineering services companies. What is your opinion in terms of growth prospects in the current calendar year?

If we look at FY26 or calendar year 2025, I believe that next financial year will be a better year than the current fiscal year. If you look at it, the sustainability work that we do in sustainability sector like oil and gas, industrial products, and others continues to grow and have good traction in terms of deal volume and velocity.

Secondly, tech and medtech continue to grow. Thirdly, mobility for us is not just auto, but we have also got trucks, aerospace and other related segments. So, next quarter, we expect to see the growth coming back in that area as well. Finally, with the Intelliswift acquisition that we have done, the big advantage we're getting is twofold.

Firstly, we have enhanced digital capabilities through this acquisition. Secondly, three hyperscaler accounts will become $20 million plus for us from next quarter onwards. Moreover, there is a big revenue market in the service led ER&D, which will come from fintech, retail, and healthcare. With Intelliswift’s acquisition, we

will be able to address that effectively and therefore, we expect to accelerate our growth further. (Against this backdrop), we will see LTTS growing fast profitably.

Mobility vertical has been under pressure in the engineering services industry as reflected from the performance of ER&D players. Do you think, mobility will do better for LTTS in coming quarters?

For LTTS, though mobility didn’t grow fast in the third quarter of FY25, we are confident that it will grow next quarter. This quarter performance of the vertical got impacted due to furloughs and related things.

How do you see revenue translation from large deal pipeline going ahead? We have seen revenue translation from large deals not at desired level for many IT and engineering services firms. Can you share your perspective in this matter?

We don’t see revenue translation from deals slowing down. We don’t see that kind of trend playing out. Currently, deals are converting to revenues. Markets are tight in FY25 and that is the reason that we have guided for 10 per cent revenue growth. But next fiscal year, we should have a $50 million account. That will be our first $50 million account next year. We will have accounts (deal wins) from hyperscalers. We will get revenue acceleration from two service-led verticals. So, we are cautiously optimistic about FY26.

Operating margin has shown sound improvement in the third quarter of FY25. Should we expect LTTS to reach its optimum margin range of 17-18 per cent (as given earlier) during the next financial year?

We have improved our margin (during the third quarter). But we have also said that reaching 17-18 per cent margin remains our medium-term target. We are likely to take a margin hit due to Intelliswift acquisition. This will come on account of depreciation, amortisation and related things. So, our medium-term aspiration is to reach 17-18 per cent operating margin level.

How do you see North America as a geography in terms of growth? Can you share some perspective on this matter?

North America numbers have taken into account the reported currency. I will not worry over growth prospects in North America. Our all three geographies have grown. Europe has grown faster than the North America.

The overall headcount of LTTS has fallen a bit in the third quarter. What is the reason behind such dip in employee strength when the company sees good growth prospects going ahead?

With AI, Generative AI and automation, we are able to do work with lesser number of people. So, the direct corelation between revenue growth rate and headcount addition is reducing a bit. Secondly, employee utilisation numbers continue to improve. Otherwise, our employee addition plans remain sound. We are going to hire around 2,000 freshers again in the next financial year. We have to understand that AI, GenAI and related technologies are supplementing job roles and improving efficiency.

Can you provide some perspective on how the GenAI practice growing at LTTS? Is it becoming a large component of your deal wins?

On GenAI, we have filed more than 170 patents. We are now investing in Agentic AI. We are building micro LLM (large language models) and SLMs (small language models) for our clients. Three of our large deal wins was because of AI and GenAI practices.