Attrition continues to be an ongoing phenomenon, says CEO of L&T Tech

Attrition continues to be a widespread phenomenon among the information technology companies. Indian IT companies have been facing a margin squeeze on account of rising wage costs, inflation and the inability to retain its talent pool.

Amit Chadha, Chief Executive Officer and  Managing Director, L&T Technology Services, told CNBC-TV18 that while demand is robust for the company, attrition continues to be an ongoing phenomenon. The company is hiring 2,500 freshers for FY23 and offers have been made for the same. The company will be hiring more freshers later in the fiscal year.

"The demand is robust. If you look at the kind of opportunity that we're seeing in the market today, be it in the US, Europe, markets have opened up. There is enough demand out there. Yes, we continue to see a little bit of attrition and we continue to recruit talent. We have taken about 3,000 freshers last year, we will be taking over 2,500 freshers in the new fiscal year," he said.

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On the order front, Chadha explained that the company is buoyant on the back of a robust deal pipeline. He highlighted that Q4FY22 saw the highest deal wins, which he believes is sustainable. In fact, the company just signed its second USD 100 million deal in the last 12 months.

"The pipeline, which is a lead indicator, is at the highest level ever that we have had. The quarter has had the highest deal wins we have ever had. I do believe that a number around this is sustainable, going forward, because we continue to make proactive suggestions to clients. They are receptive about it. And we've invested in the right areas over the last three to five years that is relevant to our customers. We've signed a second USD 100 million deal in the last 24 months," he said.

L&T Technology Services (LTTS), the engineering and research-focused subsidiary of the infra major Larsen & Toubro, on Thursday, reported a 34.7 percent year-on-year (YoY) rise in net profit at Rs 262 crore for the fourth quarter ended March 31, 2022.

In the corresponding quarter last year, the company had posted a net profit of Rs 194.5 crore. Its total revenues for the quarter rose 21.9 percent YoY to Rs 1,756.1 crore, from Rs 1,446.6 crore in the year-ago quarter.

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Shedding light on growth, Chadha explained that in FY23, it will be driven by transport and plant engineering. He added that medical and hitech will also impact FY23 growth. The company has launched a new vertical within hitech to focus on Metaverse.

"For FY23, we do believe that transport and plant engineering, both of these and then IP will drive growth followed by medical and then hitech," he said.

The company aims to reach USD 1.5 billion revenue by FY25, he said. He further shared that L&T Technology services’ internal target is, in fact, even higher. On its quest to scale revenue further, L&T Tech is hoping that acquisitions will bring in USD 50-100 million revenue, Chadha shared. He said that an acquisition may be on the anvil as early as in FY23 itself and more to follow every 18-24 months.

"We are in the market to take anything between USD 50 million and USD 100 million revenue company that we could potentially acquire. Every 18 to 24 months we have acquired in the past. We have been talking to a lot of companies, we have been evaluating, we are looking to buy a company in the ISV space, or med-tech space in the US or in automotive in Europe," Chadha added.

"We continue to look at various candidates, various companies that can be available at the right price points because it has to make sense for all parties. So we're not waiting for an acquisition, though that is something that the M&A team continues to work on. I'm hopeful that we will be able to do something this year," he explained.

On the margin front, its guidance is 18 percent, which bakes in wage hikes and travel expenses. He explained that AI and productivity tools will aid margin.