L&T Tech will hit billion-dollar run rate between Q2 and Q3 this year: Amit Chadha

All IT companies have been struggling with wage and labour cost and attrition. For and also we have been hearing attrition of about 20%. What has all of this done for your margins? Should the markets factor in 18% going forward?


Our incremental cycles are effective July 1 and our employees have been handed out the new letters or will be handed out letters in the next couple of days but usually we plan to close it so there is definitely a charge we will get because of increased labour cost but having said that we do have some avenues in terms of neutralisation, pyramid, offshoring and larger contracts that we are winning at better margins so it is work in progress, the quarter is not done yet.

Our aspiration that we announced in the earnings call to stay in the 8% EBIT range in the medium term and that is where I will leave it, but the quarter is not done yet, work is to be done.

One more thing I would like to bring out is the demand picture, we have had the best possible quarter in terms of deals so we did not sign a 100 million deal this quarter but this quarter was a 50 million deal in aero and rail, there were four deals that were more than 15 million in automotive, hi-tech and sustainability, plant, engineering and two deals again in automotive so I do believe that some of this will help us as we move forward in the quarters ahead.

You talked about the deal wins, tell us a little bit about how the overall pipeline is, how the momentum has been shaping up and whether these deals are now coming at a better pricing?


The deal pipeline today is higher than what it was last quarter. We continue to work on it. I would like to mention our teams continue to ideate for our customers putting their customers in the middle of it, create proactive deals, etc. We are right now pursuing a couple of largish contracts in Europe in automotive as well. There are contracts that are being pursued in the US in oil and gas, in IP and digital transformation so that is all work in progress daily. I believe that this deal momentum is sustainable and shall continue for the next few quarters.

I want to talk about the headcount trends and whether there are any signs of attrition moderating? When it comes to offshore and onshore mix, it seems to be skewed towards onshore versus the peers. Is that likely to change or not?


The first answer in terms of headcount is that we have added about 550 people in the quarter. Attrition is about 23.2%. It has gone up, but it is still lower than peers. I believe that we will need another two quarters to get attrition back in the teens right, so I need two quarters to do that.

We have got various measures, not just compensation increase but trying to build out on the aspirations of our employees. When a company grows, it provides opportunity and I do believe that we can provide the opportunity to our bright and young engineers. We can create magic.

Now if I go on to the offshore onshore ratio, our offshore-onshore ratio currently is about 56% offshore, 44% onsite revenues. I do believe that we could potentially go up to about 58% offshore as well right up to 60%. It can happen where we can accelerate but again to be seen like I said the quarter has not done yet, the year has not done yet.

I am saying that we had given guidance of 13.5% to 15.5% in dollar terms at the beginning of the year, I am reconfirming that guidance. In fact, I am saying that if it was constant rupee to dollar, constant currency as a quarter four I would say we will be at 14.5 to 16.5% right.

Second, I do believe that we will hit the billion-dollar run rate between quarter two and quarter three of this year. We had guided that last September and maintained that. Lastly, we had said $1.5 billion by one of the quarters in FY25, and we are retaining that as well.


You have cash of about Rs 2,200 crore on the books, how are you planning to use it?


We continue to evaluate and look at companies. Our last acquisition of Orchestra Technologies has been good for us in the 5G space and that was done about 21 months ago and that gives us the confidence to continue to look, we are looking for an ISV hi-tech space or mid-tech space asset in the US or automotive asset in Europe.

These must come at a reasonable pricing, and we continue to look and evaluate. We are looking to see if we can get something between fortyish-fiftyish million dollars to up to about even up to about $300 million if we can find an engineering company that fits in and there are various conversations at various times.

In fact, rake our sales but when we continue to have our M&A pipeline as well and we have a full team working on it and I am hopeful that we will try and do something in the future, I do not want to put a time to it but that is an active progress that we continue to make in that area.