Post strong Q2 show, L&T Infotech hopeful of meeting margin, revenue goals

After a sharp increase in profit margins for the September quarter, Larsen & Toubro Infotech, is now confident of achieving its 14-15 per cent net income margin target

After a sharp increase in profit margins for the September quarter, Larsen & Toubro Infotech, the IT arm of engineering major L&T, is now confident of achieving its 14-15 per cent net income margin target, its chief executive Sanjay Jalona said on Wednesday.

The company feels the demand environment has changed for the better as companies adjust to the new realities, and hence it is confident of maintaining the revenue growth as well, he said.

Jalona attributed the 1.1 per cent widening of the margins on a sequential basis to 15.2 per cent during the September quarter to higher utilisation, increased offshoring of work and a dip in expenses on sales and travel.

"We were not confident of maintaining margins when the COVID crisis hit us. None of us had worked in a scenario like this. But now, we are confident of achieving the 14-15 per cent targeted level on the net income margin," Jalona told PTI on a call.

The company had to give discounts to some of its customers as the pandemic began, but kept the discount as a time-bound facility, Jalona said, adding the proportion of clients seeking relief is tapering off now, which makes revenue visibility very clear.

He said the company was able to post the higher number despite inducting 1,000 trainees during the quarter, and added that it has honoured all its job commitments.

From a revenue generation front, where it posted a 16.6 per cent growth to Rs 2,998 crore, Jalona denied it being driven by pent-up demand and exuded confidence of being able to maintain the momentum.

Clients across industries, right from the mainstay of banking, financial services and insurance to entertainment, are taking a re-look at their tech spends to align themselves with the new realities, Jalona said.

He said it is this new reality which makes him confident about the revenue growth in the future as well.

The company's overall headcount rose to 32,455 at the end of September as against 31,477 as of June.

Jalona said the company will continue to add employees in the remaining two quarters as well.

He further said the annual pay hikes, which had to be kept on hold following the outbreak of the pandemic, will be rolled out from January onwards and most of the employees will get their hikes.

The company had reported a net income growth of 26.7 per cent to Rs 456.8 crore on Tuesday.