We will go for campus placement this yr & continue hiring in H2: L&T Tech CEO

L&T Technology Services posted a good set of results in the second quarter of current financial year. The company also continued to hire and announced increments for its staffers despite a tough macroeconomic environment. Though the company cuts its revenue growth guidance for FY24 to 17.5-18.5 per cent as a mark of prudence from earlier 20 per cent, it stayed optimistic about achieving its earlier projection. In a conversation with the Bizz Buzz, L&T Technology Services (LTTS), CEO & MD, Amit Chadha said though there is cautiousness among clients in general, the company sees many takers for its next gen offerings. That is the reason that its deal pipeline remains strong. When many IT and engineering services firms aa miss this year, LTTS is going to colleges for campus placement. It will also continue to hire employees in coming quarters at a time headcount of many IT firms are falling.

Can you provide a brief overview of second quarter numbers of L&T Technology Services? How is the overall demand environment in the technology outsourcing market?

We posted 3.2 per cent rise in revenue growth on constant currency term. The big thing is that our all five segments have grown after four quarters. I am happy to share that seven $10 million plus deals out of which six are in the $20 million range. Just in the two weeks of October, we have won one $10 million deal and two $20 million plus deals. Therefore, we are happy the way the team has executed. We are also able to hold and maintain our operating margins. We have given a record number of increments. Despite this, we are able to maintain our margin. Our net profit is up 5 per cent year-on-year. We now have around 1,200 patents.

What I am worried right now in terms of market is the decision-making (bit) and how things will play out. Therefore, as a sign of prudence, we are revising our guidance to 17.5 per cent to 18.5 per cent. Of course, we will try to attain the original numbers (earlier guidance of 20 per cent). Our attrition has improved and came down to 16.7 per cent. We have hired more than 500 people (in the second quarter). We will continue to hire and optimise. The goal is to hire and optimise.

Are you still hopeful of achieving the 20 per cent revenue guidance given earlier? Can you throw some light on this aspect?

There are couple of deals, and if those swing in our favour, they will actually get realised this year. So, we are still waiting to see what we can do there. We have integrated the business post the SWC (Smart World and Communication). We have started to win deals through our SWC portfolio. We have got our first telecom deal leveraging SWC’s strengths and the work has started. Secondly, we are creating service offerings around data centre. India is going to come up with several data centres. Through this offering, we will able to help organisations to set up data centres. Through this process, it will help us do business with their customers.

Recently, JP Morgan has projected FY24 as a ‘washout year’ for India's $245 billion IT industry. This seems to the case so far with most players in the IT services industry. What are your thoughts into this aspect? Do you think, FY25 will be a better year than FY24?

What you should understand is that we are still sticking to our aspiration of being a $1.5 billion revenue company by 2025. We are working towards achieving that milestone.

Can you throw some light as far as delay in decision-making is concerned? Is there any specific vertical you want to highlight?

Across the board, there is a little bit of caution in the system. In the industrial and hi-tech area, we are seeing such caution. Medical device is another vertical seeing some delay in decision-making. But, next quarter and beyond, we see most verticals continue to grow. Though seasonally third quarter is little muted due to holidays, but all verticals will continue to grow in this quarter and in coming quarters.

What is happening in the portfolio of customers? What are your readings as far as deal flow of small contracts are concerned?

The number of customers in different brackets has gone up. This is likely to be the trend in coming quarters.

How did you manage to maintain your margin in the second quarter despite hiring and increments given to employees?

We are looking at employee utilisation. We are also looking at the employee pyramid. All these things are being done. We have actually reduced our SG&A (selling, general & administrative) expenses further. At the end of the day, we have to continue improving the employee utilisation. That’s what we are going to be working on a continuous basis. We will stay in that 17 per cent range that we have spoken earlier. Because we are making investment to make our staffers upskilled in emerging areas. Around 2,000 people are getting trained in AI and SDV. New labs are getting created and new infrastructure is also being installed. So, we are investing in the business for the future. As far generative AI is concerned, we are running a lot of pilot projects. We do expect things to get exciting from January onwards. All our six big bets are firing from all cylinders.

Will you see any kind of disruption due to ongoing Israel-Hamas war? Can you throw some light into this aspect?

We have not got a big number but a small number (of staffers in Israel). They are all safe. We don’t do a lot of business in Israel. We continue to pray and monitor the situation. We are in touch with our employees on a regular basis.

The whole technology outsourcing market is favourable towards cost takeout deals in recent quarters as we have seen many such deals getting bagged by many IT and engineering services companies. Are you participating in this space?

Yes, we are winning such deals. In the last quarter, we had done a deal. This quarter, we have done some deals which are both cost takeout and transformative. We are pursuing a couple of large ones. We have to see how it plays out. The average tenure of deals is expanding. That is reason that revenue accretion is bit staggered. But, there are a couple of deals that we are fighting, if those are bagged then we will be able realise the revenue in H2.

In the current market, people who don’t have low cost delivery centre and technology backing of latest gen technologies are losing.

Many technology firms are not going to campuses this time around given the tepid demand environment? Are you going to campuses this time? What are your hiring plans?

We are going to the campuses. We hired about 2,000 people last year and we have given 2,000 offers this year out of which around 1,000 have joined. The remaining will come on board in third and fourth quarter. We will hire for next year. We are still working on the numbers on how many we will hire.