In Conversation with Rajeev Gupta Chief Financial Officer, L&T Technology Services Ltd.
Healthy financial performance driven by broad-based demand across key business segments
For Q3FY22, L&T Technology Services (LTTS) reported net profit of ₹248.8 crore, up by 33.7 per cent year-on-year and 8.17 per cent on sequential basis. What factors have contributed the most to help you outperform?
LTTS has posted healthy financial performance in the third quarter, driven by broad-based demand across all key segments of its business. The prominent factors that stand out are quality of revenue over the past year and operating margin. Revenues from digital and new age technologies came in at 56 percent of our overall business, representing a 5 percent quarter-onquarter growth.
Moreover, we touched a new high on EBIT margin at 18.6 per cent - the sixth consecutive quarter of improvement in operating margin. During the quarter, we had gains from operational efficiency measures, including pyramid optimization and rupee depreciation, partially offset by lower utilization and higher travel costs. These factors have helped us to grow further.
New deal wins during Q3FY22 takes the overall deals for the company from the EV (electric vehicle) sector to USD 90 million in FY22 till now. How is LTTS uniquely positioned to seize the market opportunities in this burgeoning industry?
LTTS indeed has witnessed accelerated traction in the EV landscape. In fact, this quarter we announced a large deal valued at USD 45 million with a tier-1 US-based EV player. Our growth in this space is complemented by the rapid transformation that global transportation companies are undergoing. This offers us added avenues to partner with them in areas of electrification and connected vehicles.
Furthermore, we have been proactively investing in building our capabilities and infrastructure by setting up a state-of-theart EV lab in our Bengaluru campus, development of indigenous ‘e-VOLTTS’ platform for electric vehicles and establishing a new R&D centre at Krakow in Poland. Our EV lab, backed by end-to-end domain expertise, is generating a lot of interest with customers and helping us win large deals. Also, at LTTS, we are engaged in high-end research projects aimed at expanding electrification to the heavy equipment segment. At the LTTS EV lab, our engineers are doing feasibility studies for high voltage topologies. This gives us the ability to work on complex projects – a case in point being the complete design of a high-voltage electric power train for a US trucks and off-highway customer.
What are your growth triggers?
We are now focusing on six growth levers or ‘6 big bets’, namely, electric autonomous & connected vehicle (EACV), 5G, med-tech, artificial intelligence (AI) and digital products, digital manufacturing and sustainability, all of which offer sizeable long-term opportunities for the engineering services business. All these domains are witnessing desired traction. Furthermore, the pandemic times have upped the need for digital and ER&D spends by enterprises. We are certain that all these combined ensure sustainable long-term growth momentum for LTTS.
What are your top three strategic priorities?
Our immediate priorities are delivering sustainable and profitable growth, maintaining and enhancing quality of revenue, advancing in the 6 big bet areas and cementing LTTS’ position as one among the top five global pure play engineering services provider of choice.
What is your earnings outlook for the upcoming quarter?
We are confident of achieving our earlier shared guidance of about 19-20 per cent year-on-year revenue growth. We also maintain our aspiration of sustained stable EBIT margin in the 18 per cent band.