L&T Technology Services, which reported results for the September quarter last week, is confident of achieving double-digit revenue growth in FY18, above industry estimates. In an email interaction with Moneycontrol, CEO Keshab Panda spoke about the company, which has a significant presence in the engineering and R&D space, their digital strategy and the way forward. Edited excerpts:
You have mentioned strong deal wins giving you the confidence that you will end the year with double digit growth. Could you give us a sense of which areas you are seeing these deal wins in?
L&T Technology Services’ growth in the quarter was led by increasing traction in our top 30 customer accounts. Our revenue share from the top 30 customers increased to 65.7 percent in the second quarter compared to 63.8 percent in the first quarter.
We also had ramped up large deals in telecom as well as in the transportation segment; there is a healthy demand in most of the business segments of telecom & transformation and medical is also doing very well. We won several multi-million dollar deals across the board in this quarter.
Overall the business avenues brought about by the emergence of digital engineering based transformation pursuits of global companies augers well for sustainable growth of engineering services landscape.
How is the ER&D market looking right now, and where do you see the growth opportunity in terms of geographies and verticals?
The relevance of innovation will only magnify in the coming quarters and this will certainly push companies to embrace increased ER&D initiatives in order to be in the survival game.
There is also a sizeable segment of businesses who resort to ER&D to boost operational efficiencies. This will be another trigger for growth in ER&D spends by corporates. The ER&D market is opening up hugely at this point of time and there lies huge potential to tap the addressable ER&D services market forecast to touch USD 302 billion market by 2021 with a bulk of it in the embedded and software services domain.
Human machine interface, artificial intelligence, machine learning, image & voice processing, neural networks, virtual reality, sensor technology and collaborative robotics are critical technologies for the future and across which we will see increased R&D activity. Another important focus area for LTTS is pervasive technologies which include embedded applications that are becoming virtually omnipresent in all spheres of business. We will continue to invest in developing eco-friendly technologies, connectivity and security solutions, all of these are critical blocks of the future.
What are the big areas where you see client spending picking up in the second half of the year?
We see demand from global customers in our core engineering offerings as well as in newer areas like entertainment platform solutions, autonomous car technologies and digital engineering solutions. These align well with the investments we are making in transformative areas that I mentioned earlier, such as pervasive technologies, smart manufacturing and perceptual engineering.
Do you see a market for E&RD services for the domestic (Indian) market?
The nature of the business ecosystem in the present-day world is such that no country or region can be in isolation. This is true even in the case of E&RD. For companies to survive and grow, the innovation aspects play a key role. And in order for Indian companies to battle it out with the global best, the product differentiator will play a key role and here the relevance of E&RD takes significance. Futuristic Indian companies including government agencies are already moving in the right direction and this is expected to benefit the uptake for E&RD services in the Indian market.
You had mentioned America's renewed focus on local manufacturing etc being an opportunity for LTTS. How is that space (manufacturing) looking for you right now?
The new administration in the USA is upbeat and focused on providing the right incentives and push the US manufacturing companies to regain their prominence in the global ecosystem. Innovation as we all know, is at the heart of shaping any competitive and distinct advantage. For this, we believe US companies will increasingly pursue R&D and thus the uptake of engineering services will enhance.
How do you see the third quarter for LTTS?
We attribute our Q2 results to our strategy of focusing on the top 30 customers. Q2 specific, verticals such as telecom, media & entertainment, and transportation helped enhance the performance. Since our clientele base comprises Fortune 500 companies who in turn are leaders in adoption of new age technologies, we are confident of sustaining growth with this focus. Considering the pipeline of orders and visibility of large deals that we expect to conclude shortly, we are upbeat of a double-digit revenue growth in constant currency terms for FY18 slightly above industry estimates.