Engineering services company L&T Technology Services (LTTS) has reported a net profit of Rs 315.4 crore for the second quarter of FY24, showcasing a 5.1 percent year-on-year (Y-o-Y) growth and a 1.21 percent quarter-on-quarter (Q-o-Q) increase. This positive performance reflects LTTS’s resilience in the face of a challenging business environment.
However, the company has revised its full-year FY24 revenue guidance due to extended decision cycles and macroeconomic headwinds. The earlier estimate of 20 percent Y-o-Y growth in constant currency (CC) terms has been adjusted to a more cautious 17.5-18.5 percent. This decision is a response to the current uncertainties in the global economy and aims to ensure prudent management in turbulent times.
In Q2FY24, LTTS reported revenue from operations of Rs 2,386.5 crore, marking a 4.6 percent increase from the same quarter in the previous year, which had seen Rs 2,281.7 crore in revenues. Additionally, Q-o-Q, revenues saw a 3.7 percent increase.
Amit Chadha, the CEO and Managing Director of LTTS, noted that while the long-term outlook for Engineering Research & Development (ER&D) remains positive, shorter-term challenges such as prolonged decision cycles and macroeconomic stress in different regions have influenced the revision of the FY24 revenue guidance.
Despite the caution in guidance, LTTS achieved significant contract wins, securing seven deals with a total contract value of over USD 10 million, six of which were valued at USD 15 million each. One noteworthy deal involves establishing a software center of excellence in India for digital transformation in collaboration with a global oilfield services provider.
Chadha emphasized that the revision in guidance was driven by prudence, with internal targets remaining higher. The caution is attributed to global factors such as prevailing interest rates and geopolitical developments in West Asia, which have contributed to market uncertainties.
LTTS has maintained its Earnings Before Interest and Taxes (EBIT) at 17.1 percent, with a marginal decrease of 10 basis points from the previous quarter. Despite normal wage hikes, the company has preserved its margins, reflecting prudent financial management.
The company’s growth in the second quarter was driven by the transportation vertical, with a growth rate of 4.4 percent, followed by the plant engineering vertical. Chadha highlighted two emerging trends: increased spending in software-defined vehicles and advancements in digital manufacturing, products, and AI. These developments are expected to further boost growth in the transportation and industrial products verticals.
Despite a trend of headcount reduction in some of the country’s leading IT companies, LTTS has bucked the trend with a net addition of 500 employees. The company’s total headcount now stands at 23,880. Voluntary attrition has cooled down by 2.2 percent, reaching 16.7 percent in the quarter ending on September 30. LTTS plans to hire around 2,000 freshers in the current year, with approximately 1,000 already onboard.
Chadha underlined LTTS’s commitment to invest in areas like software-defined vehicles, AI, and cybersecurity, with plans to train nearly 2,000 employees in these domains over the coming quarters.
In conclusion, LTTS’s performance in Q2FY24 showcases its resilience and adaptability in challenging times, while the revised FY24 guidance reflects a proactive approach to navigating uncertainties in the global business landscape.
