Led by broad-based growth, Larsen & Toubro Infotech (LTI) beat estimates in the March quarter, with revenues crossing $2 billion in FY22. However, its attrition rose to 24% in the fourth quarter. The company expects the ‘Great Restructuring’ and acceleration of digital adoption to continue, providing demand momentum for the next three years, chief executive officer and managing director Sanjay Jalona tells Rajesh Kurup. LTI, a subsidiary of construction major Larsen & Toubro, is also betting big on metaverse, even though the technology is a bit far away, he said. Edited excerpts:
* For LTI, Q4 was a good quarter, with net profit rising to Rs 637.5 crore, beating analyst estimates. Where is this growth coming from?
Our revenue grew 26% year-on-year, and we continue to see holistic growth across all geographies and service lines. Among verticals, banking and financial services grew by 35% on a year-on-year (y-o-y) basis, Insurance grew by 17.6% y-o-y, hi-tech and media and entertainment was up 27%, while others including services and domestic business grew by 30%. Consumer packaged goods, retail and pharmaceuticals grew 21.9% y-o-y and there was a good demand in these sectors from our existing clients. One of the four large deals that we won is from this vertical. Customers’ strategic spending on business transformation initiatives continues to be a key driver of demand.
* The highlight for the year was LTI crossing $2 billion in revenues.
With the ‘Great Restructuring’ (depth and breadth of evolution of everything) across sectors and regions, we foresee continued demand momentum for the next three years. The acceleration of digital adoption triggered by the pandemic has redefined the arc of enterprise evolution and we are focused on seizing this opportunity.
* What about the deals for the quarter?
In this quarter, we won four large deals with a net new total contract view of over $80 million. Three of these are from existing Global Fortune 500 clients and one is a new logo. We added three clients to our $50-million bucket, six to our $20-million bucket and over 30 clients to our $1-million bucket.
* What are the tailwinds for FY23? How do you see the deal pipeline amid the geopolitical issues?
Our deal pipeline continues to be robust, and we are confident of maintaining industry-leading growth in FY23 also. We are entering FY23 with strong tailwinds in terms of exit run rate, large deals closed, robust pipeline, the highest number of new logos and headcount additions. All the pillars of our growth strategy — comprising growth accounts, invest accounts, new account openings — and large deals are looking good. Our ability to execute in a challenging environment gives us the confidence to be in the leaders’ quadrant of growth in FY23 with stable profit after tax margins in the 14-15% band.
* Why has LTI’s attrition risen to 24% in Q4 from 22.5% in Q3?
Our quarterly, annualised attrition curve started to flatten in Q3 and has dropped further by 200 basis points in Q4. This drop is much sharper offshore, while our onsite attrition needs to be addressed. We continue to engage our employees and our Yin-Yang model (hybrid workplace model) reflects the new realities of a hybrid future of work, which will help us retain talent.
* Your plans to hire about 6,000 freshers in FY23 are much in line with those of FY22.
There is a constant upward trend in demand. We are aligned and have ramped up our supply to deliver on this demand and growth. We started FY22 with a plan to hire 4,500 freshers and we ended up hiring close to 5,200 freshers during the year. Our current plan for FY23 is to hire at least 6,500 freshers. We have also rolled out salary hikes for most of our employees, effective April 1. LTI has hired talent across the globe with net additions of over 10,600 people. About 2,400 of these were added in Q4. To put this in perspective, we added more people in FY22 than we did in the previous two years combined, and our headcount increased by 30%.
* How is Metaverse evolving as an opportunity?
I believe this is an exciting time for anyone to be in technology, and such technologies will change many things that we see in the world. However, Metaverse will take a bit more time for fruition because devices are still expensive. It will be too soon to give out any revenue estimates, but this is a global opportunity for everyone. We have set up a lab and a dedicated team. We are looking at how we can integrate client advisory meetings, give customers a channel to exhibit what the LTI office looks like and even execute projects.