Larsen & Toubro Infotech Limited Q4 FY22 Earnings Conference Call Summary

Key highlights from Larsen & Toubro Infotech Limited (LTI) Q4 FY22 Earnings Concall

Management Update:

• LTI said FY22 saw the company cross the $2 billion revenue milestone, by delivering its highest ever revenue growth this year.

• During Q4, LTI added 2,448 people on a net basis and for FY22, it stood at 10,657, which translates to 29.6% growth in headcount from FY21. The total manpower for LTI stood at 46,648, of which LTI’s production associates were 95.5%. In 4Q22, attrition stood at 24% vs. 22.5% in 3Q22 on an LTM basis.

Q&A Highlights:

• Vimal Gohil of Union Asset Management asked about weakness in cash flow generation in FY22 and its outlook. Anil Rander CFO said that LTI had a strong cash flow conversion in 4Q22 at 97% and in 3Q22 it was at 70%, mainly due to better working capital construct in 4Q. The company added that it expects to continue in the same range.

• Vimal Gohil of Union Asset Management also enquired about the company’s capex number being elevated for FY22. Anil Rander CFO replied that it’s due to the company investing in its own building that’s coming up in Mahape, which can seat 7,500 people, that is likely to go live in FY23.

• Vimal Gohil of Union Asset Management enquired about the overall demand environment. Sanjay Jalona CEO answered that looking at the demand, the pipeline, LTI is not seeing any signs of anything getting delayed at all. So it continues to be strong and LTI feels good about the demand.

• Sandip Agarwal with Edelweiss  asked about attrition and how the company is handling it. Sanjay Jalona CEO said that LTI hired 1,500 HTD people, what are hire, train and deploy because one can’t find perfect people and keep poaching from one another. LTI added that its big problem is attrition at onsite which has led to probably growth not being even higher than what’s seen in Q4.

• Abhishek Bhandari from Nomura asked about SG&A cost consistently coming down as a percentage of sales and the sustainable level. Sanjay Jalona CEO answered that LTI has said that it want to grow faster, so it can invest back in business. LTI is going to hire 100 sales people by the end of 1Q23 in US. Therefore, LTI is going to extraordinarily increase its sales cost.

• Sandeep Shah with Equirus Securities asked about onsite attrition impacting 2-4% volume growth and if it would get addressed in 1Q23. Sanjay Jalona CEO replied that it takes time and it will have to be given two quarters time. LTI added that while it’s back to March levels, the company has just rolled out salary hikes and needs to see the impact with that. By 2Q23, LTI expects to be in the full stream of 2-4% volume growth at onsite.

• Mohit Jain of Anand Rathi Research asked about fresher hiring for FY23. Sanjay Jalona CEO answered that fresher base for FY23 is set at, at least 6,500. Last year, LTI’s number was 4,500, the company hired 5,200 people. And now LTI’s base number is 6,500. So, the company will definitely do more than that.

• Mohit Jain of Anand Rathi Research asked about capex outlook for FY23. Anil Rander CFO replied that LTI will have a reasonably good capex because the Mahape premises actually will go live by mid of FY23. Therefore the trend for capex is that LTI will continue to invest in infra and new facilities.

• Sanjay Jalona CEO replying to a capex question by Mohit Jain of Anand Rathi said that the company is also investing in some other centers like Coimbatore and other locations because LTI has seen a lot of people drift to these locations during COVID. And in place of bringing them into highly congested Bangalores or Chennais of the world, these people want to stay there. So, LTI is going to invest in its capacity in Coimbatore.