L&T Tech Raises FY22 Growth Guidance, Identifies Six Investment Areas

L&T Technology Services Ltd. raised its revenue growth guidance for the full fiscal as performance across key verticals improved and client spending towards digital products rose.

A sense of return to normalcy in the U.S. and Europe and increased revenue across most verticals have led to healthy earnings in the first quarter of FY22, said Amit Chadha, chief executive officer and managing director. That in turn gave the engineering services provider the confidence to hike the full-year dollar revenue growth guidance to 15%-17% from 13%-15%, Chadha told BloombergQuint's Niraj Shah in an interview.

L&T Tech saw its revenue increase 5.4% sequentially to Rs 1,518.4 crore. Its net income jumped 11% to Rs 217 crore. Digital and leading edge technologies accounted for 54% of the company’s overall top line during the quarter.

The uptick in growth forecast, according to Chadha, was after closely analysing the spending patterns of the market, budget allocations and availability of their own talent to pick up work. “We want to go back to our heydays of growth that we had three years ago, haven’t given up on that ambition.”

The company has seen electric and autonomous vehicles-connected spend going up. “In terms of industrial products, we’ve seen clients spending on digital manufacturing and smart products,” said Chadha. Plant engineering, especially oil and gas, saw more spends, while hi-tech and semiconductor businesses continued to do well, he said. “Sustainability engineering is starting to gain traction and the effect will be visible in the next few quarters.”

The only dampener, according to Chadha, was the medical segment. L&T Tech's revenue from this segment fell around 1% sequentially. “But we’re finally seeing elective surgeries come back and remain bullish on the segment,” he said.

Six Investment Areas

The company, Chadha said, has identified six strategic investment areas that it will focus upon. Those are electric autonomous-connected vehicles, 5G, medtech, digital manufacturing, artificial intelligence for digital products, and sustainability. “These should be able to give us scale and growth.”

Within the medtech segment, Chadha said homecare facilities, electronic medical and health records and telemedicine are going to be in focus.

Outlook

According to Chadha, there’s no doubt that the world views India as an engineering hub and that the sector is poised for explosive growth.

“Currently, the global engineering services market is worth close to $1.4 trillion, of which India generates $36 billion. I do believe this figure can easily double, if not grow 2.5 times in the next five years,” he said. “Engineering services is here and now.”

Watch the full interview here: