In an interaction with Rajeev Gupta, Chief Financial Officer, L&T Technology Services Ltd
In this interview, Rajeev Gupta, Chief Financial Officer, L&T Technology Services (LTTS), elaborates about how the company has surpassed all expectations and outlines its growth strategy
Which key factors have contributed the most to help LTTS record a robust YoY growth of 23 per cent and 27 per cent in revenue and net profit respectively, for Q1FY23?
LTTS recorded a strong quarter on the back of our six big bets (electric autonomous and connected vehicles, 5G, AI and digital products, digital manufacturing, medical technology, and sustainability), which helped us to align ourselves to multiple strategic and multi-year customer programs. With digital transformation taking the centre-stage in this “new normal” for global organizations, LTTS has been the preferred engineering services partner for our clients across the board. We believe that our focus on the six big bets and capability-led investments are aligned with the multi-year strategic spend areas of global ER & D companies and this will help in driving further growth for LTTS. Notable large deal wins across verticals, and a healthy pipeline of opportunities gives us the confidence of sustaining this growth momentum.
How does LTTS plan to leverage the strong deal wins witnessed during Q1FY23? According to you, which segment will benefit the most from these deal wins?
In the first quarter we won a total of seven large deals, marking a second consecutive quarter of a large deal win in aero and rail with a USD 50 million deal in the rail space. This new deal win is in the rail signalling space where we will work on next generation connectivity-based solutions. This follows right after the USD100 million plus deal that we garnered in the eVTOL urban mobility space last quarter. So yes, our large deal win traction currently looks good. This will help us in further capability investments on the digital and automation side, as well as investments in infrastructure and workforce over the next few quarters. We are seeing strong pipeline across all segments, with transportation, industrial products and plant engineering benefitting from the recent large deal wins.
Which major trends do you foresee in the domestic and global ER & D services sector in the upcoming quarters?
The past few quarters have witnessed accelerated digitalization across the entire ER & D industry. The increased adoption of new age technologies such as AI, Machine Learning, IoT and others by customers has shifted the sector from a traditional electrical / mechanical-dependent industry towards digital engineering. With Metaverse, a new window of opportunity has opened for the ER & D sector, where players having multi-vertical capabilities will stand to benefit. Another interesting trend observed is that ER & D services organizations are also implementing digital thread to integrate their customers’ PLM systems with ERP and CAD systems. In the domestic market, there is a definitive push towards design and product engineering services by global enterprises. We are also seeing sizeable investments in global capability centres (GCCs) as they aim to drive further innovation and growth in the country. According to a joint survey by Deloitte and industry body NASSCOM, over 70 per cent companies are planning to increase their budget by 10-25 per cent this year.
Can you shed some light regarding the increase in the voluntary attrition rate from 14.5 per cent in Q1FY22 to 23.2 per cent in Q1FY23? What measures are being implemented to cope with the same?
Although attrition has risen, we are seeing signs of stability and at LTTS we are constantly working at measures to curb attrition across our employee base. Our Global Engineering Academy (GEA), which is focused on developing LTTS as a continuous “Learning Organization”, has done a commendable job in upskilling, reskilling and cross-skilling employees. Through targeted internal engagement and transformation initiatives and programs, we continue to strengthen the foundations of our people-driven growth trajectory. We have redefined our outlook through a revitalized ‘Vision, Mission and Value’ statement, thus creating a new cultural manifesto for employees. Our “Value Walls” across our global locations is reflective of the inherent spirit of creativity of our employees. Through various employee initiatives, we have been successful in redefining the workplace and incorporate the expectations of our employees. This has helped us in being recognized as a Great Place to Work® for our best practices across India.
What skill set is required to be the CFO of a global leading ER & D services company? Can you tell us about a challenge that you successfully faced during your tenure?
I believe the key qualities required of a CFO in today’s age are agility, strategic thinking and enabling digital transformation for the organization. The current environment requires CFOs to deal with ambiguity, anticipate challenges emanating from geopolitical uncertainties, while staying on track to deliver growth and operational excellence. The finance function itself is undergoing a transformation as it involves not just fiscal discipline but also elements of innovation in processes and systems combined with digital readiness to ensure business continuity in challenging business and market situations.
In this context, I would like to talk about the pandemic and the organization’s resilience in the face of the crisis. While it disrupted sectors, we at LTTS not only stabilized the business through business continuity plans and an agile operational and financially sound model, but also positioned it to thrive amid uncertainty. The WFX model adopted during the pandemic allowed employees to work in a hybrid environment, while digital clones of our various R&D labs showcased our cutting-edge offerings and technology solutions to our global clientele, delivering a seamless customer experience during the lockdowns. Our large deals pipeline actually grew during the pandemic, reflecting the soundness of our strategy.