Engineering services firm L&T Technology Services will roll out salary increments for its employees effective April 1, 2021. This comes at the back of the growth momentum the company is seeing in the market and strong deal wins.
Speaking to Moneycontrol on Wednesday after the company’s results for the quarter ended December 31, 2020, Rajeev Gupta, CFO, explained that L&T Technology Services would hike salaries in phases. While junior employees will get their increments effective April 1, senior employees’ salary increases will be rolled out in July.
Other major IT services firms such as TCS, Infosys, Wipro and HCL Tech rolled out salary hikes for employees effective October 1, 2020 through January 1, 2021. In the case of Tech Mahindra, the company has planned salary hikes for its junior-most employees in FY21 (before March 2021) and for the rest in calendar year 2021 (before December 2021).
COVID-19 impact
Amit Chadha, Deputy CEO, L&T Technology Services, said: “The company did not roll out increments in FY21. Because of COVID-19 we had a problem in Q1.”
The company’s growth declined 11.8 percent in Q1 in the wake of COVID-19. This led LTTS to guide for a revenue decline of 9-10 percent in FY21 in dollar terms.
However, after a sharp decline in the June quarter, the company’s growth improved. “We started to climb back out and Q2 was better than Q1 and Q3 has been better than Q2. …we are a tad shy from Q4 in FY20,” said Chadha.
FY20 growth
The company was poised to grow in double digits in Q4 FY20 and it had guided for 10 percent growth for the quarter. However that declined due to COVID-19 and the company’s growth stood at 2.1 percent year-on-year at the end of March 2020. L&T Technology Services had grown 7.3 percent (YoY) in dollar terms in the quarter ended December 2019.
Growth momentum coming back
Now, in Q3 of FY21, L&T Technology Services is seeing the growth momentum return.
The company reported revenue of $190.1 million, down 4.6 percent year-on-year and up 6.8 percent sequentially. This has come at the back of the company's investment in digital paying off as well as deal momentum.
L&T Technology Services signed its largest deal win of $100 million in the plant engineering sector in the last quarter. The company is also currently pursuing deals in the $25-50 million range. Growth is also picking up across sectors, with most reporting sequential growth. Telecom and medical devices clocked double digit YoY growth for Q3 FY21.
How did the overall industry fare?
Unlike IT Services, engineering and R&D (ER&D) is yet to pick up pace given that the investments are long-term. However, the recent times have seen the market improve with companies witnessing a significant uptick in deal momentum and improved decision cycles.
C Vijayakumar, CEO, HCL Technologies, a key player in the ER&D segment, said his company is seeing good traction in the hi-tech, communication and semiconductor segment. “In ER&D we will see growth in what we call digital engineering, which is around 5G deployments, IoT and data engineering,” he added.
With growth momentum back, IT firms are stepping up their hiring plans. TCS, Infosys and HCL Tech plan to hire close to 79,000 freshers in FY22. There are robust hiring plans for laterals as well.
L&T Technology Services headcount, too, increased from 15,902 in Q2 FY21 to 16,069 for Q3 FY21.
FY22 outlook
In a note, brokerage firm ICICI Securities said: “Strength in large deal wins during Dec-20 in conjunction with favourable base in FY21E will likely translate into optically robust revenue growth in FY22E (for L&T Technology Services).”
CFO Gupta said the company is looking to get back to Q4 FY20 growth for the quarter ending March 2021. ”In Q4FY21 we want to come back to FY20 levels. For us that is really pre-COVID. In terms of revenue that is how we would like to see Q4 FY21 and we are working towards it,” he declared.
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