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earnings | IST

L&T Tech says 18% margin trajectory likely; deal pipeline up

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Amit Chadha, MD and CEO of L&T Tech Services, believes the demand environment is stabilizing for the company and he expects margin to be in the 18 percent range going ahead. He also said that the company's overall goal is to get to USD 1.5 billion run rate by FY25.

L&T Technology Services posted its Q2 earnings coming in well above estimates. The company has also upped its FY22 revenue guidance for the second consecutive quarter to 19-20 percent. “The demand environment is stabilizing,” said Amit Chadha, MD and CEO of L&T Tech Services, while discussing the Q2 earnings fine print.
“We are seeing demand staying solid. We are closer to the end of the year, so there is a higher degree of certainty. We have been able to improve our supply chain as well. We took on board about 1,200 freshers in the last six months and we plan to hire about 2,000 in the next six months. All in all, it is giving us the confidence and that is what is reflecting in the guidance,” he said.
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He believes there are a lot of factors that could make CY22 equally exciting as CY21.
On margins, he stated, “We have guided that we want to be in the 18 percent range as we go forward. So, our goal will be to stay in this trajectory as much as we can. There were wage hikes that we have absorbed because we took out some of our overall overhead cost last year and therefore the growth expansion has given us the margin expansion uplift.”
The company has guided USD 1 billion runrate by Q2FY23-Q3FY23.
“Our overall goal is to get to USD 1.5 billion runrate by FY25. So, we are going to continuously work on the six dimensions that we have charted for ourselves to be able to progress forward. We see strong demand environment and we also see our own pipeline expand by about 18-20 percent over the last quarter. So, all healthy signs,” he said.
In terms of deal size, he mentioned, “In the engineering industry, you don’t get a lot of USD 200 million deals, you will see a number of deals in the USD 10 million - USD 25 million range. We have seen the deals in the USD 10 - USD 25 million range go up. We are also pursuing USD 50 million plus deals. We do see a more decisive environment from taking decisions from our clients’ side in the US and Europe and we are seeing people starting to lockdown some of their decisions for CY22. So, I do see that positivity there.”
Company’s attrition rates are still lower than the industry peers. However, there is more work to be done in that area, he noted.
For the full interview, watch the accompanying video.
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