L&T Technology Services ups revenue guidance on demand uptick

Engineering services firm banks on larger deals to pick up pace

Mid-tier engineering services firm, L&T Technology Services (LTTS) has revised its revenue guidance upwards as the firm sees rising demand for its services across various verticals in coming quarters apart from a healthy deal pipeline. The L&T Group company now expects its revenue in FY19 to grow 21 per cent as compared to 16 per cent as it had guided earlier.

Higher growth in key verticals such as industrial products, process industry and transportation is one of the factors for this upward revision, Keshab Panda, chief executive officer and MD at L&T Technology Services told Business Standard.

"We are expecting this growth (21 per cent) to come from our organic initiatives," he said.

Industry body Nasscom has projected IT exports revenue (including engineering services revenue) to grow between 7-9 per cent in FY19. IT services industry companies in India are still struggling with high single digit growth rate even though industry leader Tata Consultancy Services has shown two consecutive quarters of double digit growth in the ongoing fiscal.

According to LTTS, industrial products segment, where growth was little weak with revenue growing at single digit, has regained momentum for the company in the second quarter. "In July-September, all our five verticals have grown in double digit on YoY basis. This is the key difference as compared to previous quarters," Panda added.

While revenue growth in transportation vertical was at 25.9 per cent, it stood at 10.8 per cent for industrial products. Similarly, its telecom & hitech and process industry grew more than 40 per cent in the quarter ended September.

Healthy deal pipeline was another reason behind the company revising its revenue guidance. The engineering services firm had also increased its high value clients in the second quarter with addition of around 9 accounts. Its revenue from digital technologies had also increased by 66 per cent on YoY basis, constituting 33 per cent of the total revenue.

"We have seen margin improvement in the last four quarters. I think, we will be able to sustain it in the near future," Panda said. In the Q2, LTTS reported an operating margin of 18.1 per cent, an expansion of 110 bps over the previous quarter.

Panda said , the company is looking at inorganic route to build of capabilities in various technology domains. LTTS have recently acquired Bengaluru-based Graphene Semiconductor Services for Rs 930 million to strengthen its capability in chip design and embedded software services.

"We are always looking at inorganic growth. But, there are very few companies working in our space. So, we will look at a company which can provide us capabilities across segments."

The company, which added 504 employees on net basis to take it employee strength to 13,585, remains positive on hiring outlook. "We are hiring people in US and India. But, our focus is more on quality of people than on numbers," Panda said.

In the second quarter, the engineering services firm's net profit grew 56 per cent on YoY basis to Rs 1.9 billion. Its revenue rose 41 per cent to Rs 12.66 billion during the quarter.