No layoffs, but will take steps to cut costs, says L&T Infotech's Jalona

We are not looking at any layoffs at present, but we are looking at all ways and means to protect profits and save money to minimise the revenue impact, say Jalona

L&T Infotech closed FY20 with a stronger set of numbers. The company’s Chief Executive Officer and Managing Director Sanjay Jalona tells Sai Ishwar that despite Covid-19 affecting some of its business verticals like manufacturing and retail, the company is optimistic of posting better growth in the ongoing financial year. Edited excerpts:

How would you rate the company’s performance in the year gone by?

We had a difficult first half on account of some client-specific issues with budgets being slashed. But we came out strongly in Q3 with 8 per cent quarter-on-quarter revenue growth. The company has managed to clock 4.7 per cent growth in constant currency terms, despite 2-3 weeks of Covid-19 related disruption in March, backed by good order bookings and new deal wins.

Most of your larger peers have deferred salary hikes. What is your plan? Are you looking at effecting any staff reduction?

Our salary hike cycle is scheduled in July, but we have postponed it to January. We are not looking at any layoffs, but are looking at all ways to protect profits and save money to minimise the impact on revenue. There will be a decrease in the utilisation levels as well.   

The Banking, Financial Services and Insurance (BFSI) vertical has seen the lowest sequential growth, and within that, the growth of ‘Insurance’ segment has declined. Why?

There is absolutely no force majeure clause revoked in insurance. Insurance has seen 9.5 per cent growth year-on-year despite the sequential degrowth. And, it has posted 12.2 per cent growth for the full year. BFSI was challenging in the first half of FY20, with one of our largest customers undertaking budget cuts. But again, the vertical has shown 15.1 per cent growth year-on-year.

How do you the BFS performing? Also, which vertical could be impacted the most?

The company had a healthy order book and deal pipeline to help heading for a strong FY21. But now, some verticals are impacted more. Luckily, we have no exposure to hospitality at all and very minor exposure to retail. For us, manufacturing and oil & gas have been impacted significantly owing to Covid. However, the large deals we have bagged in the past year, strong pipeline, and order book give me confidence that we will be in the leaders' quadrant of growth.

By when, do you think, the IT industry can see recovery from the impact of Covid-19 pandemic?

I'm not in the prediction game but based on where we stand today, I think the impact will be more in the first quarter. Some verticals like BFSI will see an impact in Q2, as they will see some defaults and some of them will also undertake cost-cutting measures. 

Around 75 per cent revenues come from North Americas and Europe, the two have been impacted by Covid-19 the most. How do you see this?

I haven't applied my mind in terms of geographies. We have had a higher impact in Europe in the last eight weeks, as we did not receive the clients' regulatory approvals to work from home. But it will differ for each client based on the approval processes and the nature of work.

The US has recently suspended all incoming immigration. Does it affect your US operations?

We are focussed on hiring more locally and setting up offices there. The requirement to hire more local people is going to be more muted than normally as overall growth itself is going to be muted. This is an opportunity to invest in the right kind of resources to mould them to operate from global centres.

Still, a few brokerages have not ruled out a merger between LTI and Mindtree. What’s your view?

It is not in my hands to do it. These are two publicly listed firms. L&T Chief S N Subrahmanyan has been very clear about his position and how we would operate. We will continue to operate independently. So it (possible merger) is for the board to decide on the future. Our job is to perform.