IT services company Larsen & Toubro Infotech (LTI) had a great start in FY23, growing nearly 30.62 percent in consolidated revenue from operations. The company added net new total contract value (TCV) of $79 million in Q1, with four large deals and an additional large deal along with Mindtree. While short-term prospects of the company for the next two quarters look positive, the management remained cautious of the demand cycle in the quarters beyond calendar year 2022.
Interestingly, this quarter LTI also reported a drop in attrition rate by 20 bps to 23.8 percent QoQ, and added 2,100 freshers.
In an interview with Moneycontrol, Sudhir Chaturvedi, President Sales and Executive Board Member, LTI and Nachiket Deshpande, Chief Operating Officer and Executive Board Member, LTI discussed the prospects of the joint entity once the merger with Mindtree closes, and the scope of the synergy for leveraging opportunities in the 5G and metaverse space.
Sanjay Jalona was always called the consistent performer by analysts. Did his exit mid-quarter impact business continuity, client relationship and project delivery deadlines?
Sudhir : Our consistency continues. Our revenue grew at 2.9 percent on a constant currency basis. If we take services alone, we had a large pass through component in Q4 which is an overhang over our Q1 revenue. Our services revenue grew 5.1 percent QoQ, that is a record growth. Customer satisfaction is at all-time high for us. Our short-term demand requirement for Q2 is strong especially on the back of various factors whether it is the existing accounts or the four large deals we added in Q1, the 5th deal we announced with Mindtree and we have a strong base now across the board. That is propelling us to consistent performance and good growth.
How are you preparing for the merger? Will there be more operational redundancies?
Sudhir : In terms of the merger timeline, we have received approvals from the stock exchange and SEBI. We now have an August 10 date with the NCLT, it is progressing as per the plan. We are looking to close the formalities over the four to six months. We are on track on that.
The entire case for the merger is revenue-related. The entire rational is that together the companies will grow faster. We are focusing on ensuring we are not just keeping the entire leadership and all those teams that existed, we are going to add to those teams. We are growing at 26.6 percent YoY. We need to add more talent in the organization. The redundancies don’t figure in our discussions at all, we are seeing whether we are accelerating at the pace of growth as we go ahead.
LTI’s attrition rate went down in Q1 to 23.8 percent, will this sustain in the upcoming quarters? What’s the hiring outlook?
Nachiket: We are seeing that the attrition rates for us is stabilizing over the last two quarters. About the 20 bps drop, I won’t read too much into it. It might just be a quarterly fluctuation. But we see it stabilizing. Now it’s two quarters and it won’t be long before I could start calling it a trend. We see that potentially it will stabilize at this level for a quarter or two and then start normalizing at a lower rate.
As far as the hiring outlook is concerned, we have had a record Q1 external hiring this quarter. With the growth momentum we see in Q2, it makes us confident to continue growing. We are going to hire 6,500 freshers this year and all our campus programmes are working towards that.
There is an increasing trend to hire locally closer to where the client is. What are your plans when it comes to hiring in international markets like US and Europe?
Nachiket: We have been driving localization as a part of our strategic initiatives globally. Some of our markets like countries in Latin America, we are already 90-95 percent local there. In the US also we were striving for a 50:50 range and have made at least 10 percent improvement in our local hiring in the US over the last couple of years. So we will continue hiring through our active campus programmes in the US and European countries where we have a strong base. It’s part of our strategic alignment and irrespective of our quarterly numbers we will be in line with this.
What’s LTI’s gameplan for 5G? We have started seeing both TCS and Tech Mahindra move fast in this segment. With the merger with Mindtree closing soon, which is already strong in hi-tech segment, how are things likely to change?
Sudhir : From a L&T Group perspective, various companies in the group have specific offerings to leverage the 5G opportunity. So we are going to take a group view here. For Mindtree and our engineering company LTTS, both have a strong presence in 5G services, we leverage both of them. We are strong in data and that is our largest service line right now, therefore edge computing which is accelerated by 5G. You can make localized machine or a device intelligent by just being able to take the sensor data, analyse it and giving instructions to the machine to operate differently. That’s where we come in. Our expertise in data and edge computing is what we want to focus on, and by combining 5G with it we can enable real time data intelligence through closed loop 5G networks.
Nachiket: Similarly, opportunity exists within L&T Group for digitization. With the construction group we have done 10,000 equipment and sensorisation over the last three-four years. That’s where we significantly benefit from edge computing. We are not only looking at them to look at the pattern and analysis kind of use cases that we do today, but do more controlled use cases where real time feedback and optimization that is needed.
Similar products like smart manufacturing and connected products world have been taken to the market by Mindtree as well. Combined together, we are able to take the benefits of 5G to industrial use cases as well as consumer use cases and that’s where our play is. We don’t play too much into the Telecom stack.
How will the combined entity look at approaching metaverse? Any moon-shot ideas you are currently working on?
Sudhir: It’s a space where we are already working with a number of clients and some of the examples is where we are working with global services companies, which are trying to build advisory services using metaverse for location advisory or building some retail metaverses for consumer brands. These are not just experimentation. We are seeing business use cases, from our perspective projects have started to happen on metaverse. Like cloud, a lot of people put lot of things in to metaverse and that term continues be ever expanding.
The entire AR/VR space has been very strong where we are working with a lot of our industrial manufacturing clients to build digital twins. There’s one piece where AR/VR is graduating to metaverse and then there is another piece where consumer experience is graduating to metaverse. Then there’s this third area around NFTs and alternate reality world of decentralization etc. we are seeing interests and conversations with clients across these three aspects and some actual projects as well.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
