L&T Infotech hosted a conference call on Oct 15,2022. In the conference call the company was represented by MrSudhirChaturvedi-President sales, MrNachikethDeshpande- COO and Mr Anil Rander-CFO.

Key takeaways of the call

Revenue in US $ terms stood at US $ 601 million a growth of 3.6% QoQ and 18.1% YoY in USD. In constant currency revenue growth was 4.6% QoQ and 21.6% YoY.

Revenue in rupee terms was Rs 4836.7cr up 6.9% QoQ and 28.4% YoY.

The company has closed 4 large deals with net new TCV of over US$ 80 million in the quarter. 3 of the large deals are with existing logos (one of it is a fortune 500 client) and one new logo. These deals are broad based and spread across the portfolios insurance, hitech, manufacturing and services.

Post these wins, the company's large deal win pipeline remains similar to previous quarter approximately US $ 2 billion.

On the new logo front the company added 22 new logos, with the highest new logos coming from BFS vertical. The company had double digit growth across all its client buckets.The company added 1 client QoQ in US $ 50 millon + category.

From vertical perspective: BFSI which constitutes around 48% of the total revenue grew 29.1% YoY in CC and overall budgets in the company's clients continue to grow in payments and commercial banking, the company has strong pipe line from most of the key clients; Insurance which has started recovering grew 15.8%YoY in CC, The growth number in insurance has improved in last few quarters led by large clients coupled with addition of new logos in this sector; Manufacturing grew 11.9% YoY in CC terms and the company is seeing some caution in the environment. On account of inflation customers are reducing their spends on discretionary items as such there will be a focus on operational efficiency and outsourcing. The company's pipeline is building in these areas and the company is well positioned in the strategic discretionary spends and operating efficiency spend; Energy and utilities grew 29.9% YoY in CC terms, demand environment continues to be strong in the vertical; CPG, retail and pharma grew21.8 % in CC terms YoY driven by the growth in large accounts and large deals announced last year; High-tech, media and entertainment was flat YoY with slightly negative on account of one of the customers transitioning from a fully on site mode to offshore (moving to global delivery model as per the original deal structure) and Others grew 40% YoY as one of the marquee services customer ramping up sequentially . This account is on track to become a US $ 50 million account.

On the geographies side the company saw a broad based growth with North America and Europe continue to be the key drivers growing by expanding 21% and 30% YoY growth in CC terms. Excluding the impact of the currency the company expects bot the geographies to grow well. In Europe the growth is driven by large deal traction and new logo wins. The company witnesses strong demand around its capabilities around ERP, data and cloud.

On service lines, Analytics, AI & Cognitive and Enterprise Integration & Mobility have grown well with growth of 44% and 38% in CC terms YoY respectively. Revenues from both of these practises have doubled in last 3 years.

Margins: EBIT stood at Rs 780.9 cr translating into EBIT margin of 16.1% against 16% in Q1. Increase in employee cost and moderation in utilisation was offset by currency benefits and seasonal impact.

Depreciation Cost : The company expects that the depreciation cost will normalise going forward.

Human resource : The company has crossed 50000 head count in the quarter taking the total head count to 50981(Of which production associates were 95.5%). The company's hiring engine continues to work well and is not planning for any moderation in hiring plan. The net head count addition stood at 2215 in Q2FY2023 and is in line with the earlier planned.

The company is on track to add 6500 fresher's in FY2024. The company on boarded 1000 and 1600 fresher's in Q1 and Q2FY2023 and will on-board all the fresher's in Q3 who are offered.

LTM attrition stood at 24.3% in Q2FY23 when compared to 23.8% in Q1FY23. The company is witnessing some softness in attrition the company expects that attrition will moderate in H2. However the company expects that the supply demand mismatch will continue for several quarters before it moderates.

Utilization: Utilization excluding trainees stood at 82.1% in Q2 FY2023 as against 81.8% in Q1FY2023 and including trainees stood at 80.3% in Q2FY2023 as against 81.3% in Q1.

Merger Update: The company is in the last leg of regulatory approvals and the company will be able to combine forces by the end of calendar year 22. Through the integration committee, the integration is expected to happen fast. Majority of the integration is expected to be completed by Q4FY2023.

In Q3& Q4 the company expects some merger related expenses but as of now cannot be quantified.

Outlook:The company continues to see some challenging economic environment marked by high inflation and geo political issues.

Now that the company is in the 3 rd year post pandemic, it is witnessing more regular decision making cycle although this is still faster than the pre-pandemic level. With this the overall macroeconomic environment and anticipation of recession willhave an impact on clients spend especially once the company enters the new calendar year CY2023

Though the company has not seen any cancellation, the clients are looking at spreading out the technology spends. The customers want to bring in control over wrong spends. There will be an efficiency play on the new stag.

The company is staying close to the clients to understand their needs; business growth needs are still apriority with the clients as such the company is seeing that the dollars that the clientswill allocate for business growth will continue. However, with new programs, the clients will run value realization program to meet the business growth as well as to fund the strategic initiatives.

The company expects the Q3 performance to be as strong as Q2 if not better. The company will continue to be in the leader'squadrant of growth.

The company plans to exploit the growth opportunities available in the market.

The company expects to be in the guided band 14-15% for PAT in FY2023. Management Commentary: Commenting on the performance Mr SudhirChaturvedi, President Sales & Executive Board Member said: “We are happy to report 21.6% YoY revenue growth in constant currency. We remain excited about the proactive conversations we are having with our customers and see increased traction in the cloud and analytics space. The strength of our pipeline and our sustained net headcount addition will continue to fuel our growth”. NachiketDeshpande, Chief Operating Officer & Executive Board Member said: “We are happy to be on the last leg of the approval process for the LTI Mindtree merger and are most likely to combine forces by the end of this calendar year. The merged company will bring together complimentary portfolios and a large customer base creating extraordinary value for all stakeholders.”