L&T Infotech hopes to clock double-digit revenue growth on large deals

After facing client-specific issues, IT firm's BFS and hi-tech vertical are likely to improve performance in H2FY20

Despite facing client-specific issues in the last two quarters, mid-sized information technology (IT) services company Larsen & Toubro Infotech (LTI) is hopeful of posting double-digit growth in revenue in constant currency terms during the ongoing financial year.

The IT firm, which has seen some softness in the banking, financial services and insurance (BFSI) vertical, is also expecting rise in client spending in the second half of this financial year.

“Looking at the large deal ramp-up and our deal pipeline, we are going to grow in double digits (this financial year),” said Sanjay Jalona, chief executive officer & managing director at LTI, adding, “We have not seen any delay in closure of large deals.”

LTI’s revenues from BFS (banking, financial services) have been adversely impacted in the last two quarters, owing to insourcing by some large banking clients, such as Citi. However, the IT firm sees growth revival in this key vertical from the third quarter onwards.  

“One of our largest customers has cut down spending in the BFS vertical. Growth in this vertical was flat and we expect it to pick up, starting from the third quarter,” said Jalona. He also said that out of three large deal wins in the second quarter (Q2), one came from the BFS vertical.  

Financial services vertical is one of the key business segments for the IT services firm, as the company drew close to 30 per cent revenue from BFS in 2018-19, while insurance contributed close to 18 per cent in this period.  

Apart from financial services, the hi-tech vertical also witnessed some growth bumps as one of the large clients ramped down their engagement with the L&T Group company.  

“We had seen some ramp-down by one of our hi-tech clients. If you take out that account, we had an overall handsome growth in Q2. We are very optimistic about the growth in this vertical in the coming quarters,” said Jalona. In the Q2 ended September, hi-tech, media & entertainment, contributing around 11 per cent of total revenue, saw a decline in growth by 12 per cent on a sequential basis.

However, all other verticals of the company grew handsomely on a sequential basis. “Client-specific challenges (in BFS and hi-tech) have probably troughed and a large deal trajectory is expected to improve growth momentum hereon,” HDFC Securities wrote in a note.

The IT firm, which has acquired Bengaluru-based cloud consulting firm Powerupcloud Technologies, said it would look at acquisitions for building up specific capabilities. “This is our fourth acquisition in this calendar year. Our theory is that if you build capabilities, customers will come and stay with you,” said Jalona.  

LTI, which draws close to 40 per cent of its revenue from digital services, also said it would grow further in the coming quarters. The IT firm posted revenue of $364 million for the July-September quarter, a growth of 2.4 per cent sequentially and 11.9 per cent on a year-on-year basis.