L&T Technology Services (LTTS)- Unique ER&D Play!

L&T Technology Services Limited (LTTS) is a global leader in Engineering and R&D (ER&D) services. Our ER&D services help customers innovate to build new products, minimize cost of development, reduce time to market, and meet the increasing regulatory demands. Partnering with 52 of the Fortune 500 companies and 51 of the world’s top engineering R&D spenders, LTTS offers cutting-edge solutions in the areas of Digital Engineering, Cloud, Analytics, Artificial Intelligence, Machine Learning, Automation, Augmented and Virtual Reality, and Cybersecurity.LTTS is a publicly listed subsidiary of Larsen & Toubro Limited, the $18 billion Indian conglomerate operating in over 30 countries.

LTTS provides E& RD in various segments like Industrial, consumer electronics, medical devices, transportation, plant engineering, telecommunication, semiconductors, media & entertainment

CEO- Mr. Keshav Panda has doctorate degree and worked in DRDO, ISRO. He has studied in IISC, IIT Bombay, Wharton and has 27 years of experience.

Financial Performance - From Screener.

  • Sales growing @ 13 % cagr (3 years avg)
  • Profit growing @ 18% cagr (3 years Avg)
  • ROE: 30%, ROCE: 38%
  • PE: 23
  • Debt Free

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Customer Geography
North America constitutes largest market with 57.6% of revenue share followed by Europe and India with 18.6% and 11.7% share respectively. Rest of the world contributes 12.1% of our global revenues.

Latest Quarter results are much better than past past cagr & is way above guidance.Highlights for Q2FY19

Q6 Q9 Q10 QoQ YoY
Sales 900.60 1,152.20 1,266.10 10% 41%
Net Profit 123.00 198.10 191.80 -3% 56%

From Website: https://www.lnttechservices.com/

  • Employees: 13000+
  • Customers: 235+
  • Repeat Business: > 90%
  • Patents Filed: 349
  • Acquisition: Graphene & Esencia

As part of our 5-year Lakshya strategy, we have drawn up an organization wide roadmap termed as the 20:20:20 vision. This blue print envisions a sustainable 20% annual topline growth, complemented by healthy EBITDA margins of 20% and 20 new technology patents annually, which will achieve the momentum necessary to drive growth to $1 billion by 2021.

Industry Outlook
The $75-80 billion ER&D global services industry is expected to grow at a rapid pace (14-16 percent YoY) and reach a valuation of $145-155 billion by 2020.

Opportunities , Challenges & Risk

  • “Indian ER&D market is registering a combined annual growth rate (CAGR) of 13% since 2012. Our $24 billion is only 22% of global market size. The share of the US and UK continues to be big compared to India,”
  • India is Still a follower than a trend-setter
  • Limited global eco-system connect, lack of innovation culture and availability of converged digital and ER&D skills
  • Top 30 customers contributes more than 50% revenue. Concentration Risk
  • lack of large deals. 89 nos 1 mn deals and only 2 nos 50+mn deals
  • Over dependence on North America

Competition in India
TCS, Wipro, HCL

Total Bank Loan Facilities Rated Rs.250 Crore
Long Term Rating CRISIL AA+/Stable (Reaffirmed)
Short Term Rating CRISIL A1+ (Reaffirmed)

I am not a SEBI registered financial advisor. Initiated a small tracking position. This is not at all a Buy/Sell recommendation.

Request to VP members to share feedback !

Source of Information: Screener, Annual Report, Online eR&D market reports etc


Thanks for initiating the thread.

Even though 50% revenue from top 30 customer is a risk, it shows that company is able to mine existing customers and that’s a good sign. Current growth in IT and related services is mainly from existing customers as large deals are hard to come by. Though LTTS is not a traditional IT play and that’s the most exciting thing about it. Innovation is their DNA.

During the analyst meet in August, LTTS shared their plan to move up the deal value chain as below by FY21.

Revenue No. of Clients
50+ ml - 2
30-50 ml - 4
20-30 ml - 5
10-20 ml - 22
5-10 ml - 28
1-5 ml - 37

Company had guided for 16% revenue growth at the beginning of the year which is revised upwards to 21% now after Q2 results. All their 5 verticals are growing in double digits. Industrial products which was lagging in growth has also picked up in Q2.

Opportunities in 5G, EV/Automated cars and robotics is huge and company has been recognized as leader in most of the category it operates.

Disc: Invested and planning to add more if there is valuation comfort.



LTTS continues to deliver robust growth across all its five verticals. Double digit growth in all operational vertical for 2 quarters in a row.

EBIDTA margins are going up from last 3-4 Qs. YoY around 300bps improvement there. Overall a good quarter in a seasonally weak Q3 for export oriented sector.

Company also revised its revenue guidance to 24% from earlier 21%. Interesting thing to note here is they revised revenue guidance from 16% to 21% after Q2FY19 results.

Concern - CNBC TV18 reporting that one of the USD $30m client is ramping down in Q4 due to in-sourcing.



Summary of the concall (source: capital market)

  • Q3 revenue grew 4% QoQ and 35.9% YoY to Rs 1316.9 crore.

  • In $ terms revenue at $185.7 million grew 4.8% QoQ and 23% YoY.

  • In constant currency terms revenues grew 4.6% QoQ and 25.2% YoY.

  • Net Income at Rs 185.6 crore for the quarter is down 2.8% QoQ but up by 47.0% YoY.

  • Net margin stood at 14.1%.

  • The company acquired 100% stake effective October 15, 2018 in Graphene Semiconductor Services Private Limited. In Q3FY19, Graphene contributed $ 2.2 mn to revenue.

  • Q3 results demonstrate robust topline and operational performance.

  • It has sustained the double-digit growth trajectory across all industry segments by building on its excellent positioning in digital & leading-edge technologies which has now risen to 34% of revenues.

  • During the quarter, LTTS won 8 multi-million dollar deals across all industry segments.

  • On a YoY basis, LTTS has increased its USD50mn+ clients by 2, USD10mn+ clients by 4 and its USD5mn+ clients by 10.

  • Its execution engine has been firmly focused on improving profitability along with growth.

  • EBITDA margin has inched up consecutively for four quarters to 18.4% in Q3, which is an improvement of over 300 bps on YoY basis.

  • It continues to invest in building new capabilities and creating new labs to aid innovation.

  • In Q3 it started the 5G lab, where its engineers are working on new challenges and concepts. Such investments have been yielding results consistently as recently the company was recognized as a leader in IoT technology by Zinnov and awarded the IoT Platforms Leadership by IoT Evolution Magazine.

  • The platforms and proprietary solutions that it is developing in areas like Smart Campus, Autonomous Vehicles, NB-IoT, Digital Factory and Robotic Automation is helping LTTS to be at the forefront of the ER&D Services industry that is participating in transformational technology.

  • The demand environment remains healthy, and the strong growth achieved in the current year-to-date gives confidence of exiting FY19 with industry leading growth once again.

  • At the end of the third quarter, the patents portfolio of L&T Technology Services stood at 363, out of which 264 are co-authored with its customers and 99 are filed by LTTS.

  • 14 new patents were added in the quarter with 6 being filed by LTTS and 8 co-authored with customers.

  • At the end of Q3FY19, employee strength stood at 14777, a net addition of 1192 during the quarter.

  • Transportation vertical saw 4% qoq revenue growth led by auto and aerospace. This vertical is seeing demand from embedded software, Pipeline in Transportation vertical is good and the company is setting up ODCs in number of geographies.

  • Industrial Products vertical saw good traction during the quarter led by intelligent buildings, smart cities and IBM solutions. This vertical has started working on renewal energy. It sees opportunity in digital space as customers look to improve manufacturing operations. This vertical is confident of sustaining growth trend ahead.

  • Telecom & Hi-tech vertical saw growth led by consumer and semiconductor segment. It has started working with leading set top box manufacturer.

  • Process Industry vertical is seeing good pipeline from engineering in US and Europe.

  • Medical Devices vertical is seeing opportunity arising from change in regulatory regime from 2020 and healthcare moving to self care, home care and remote care. This vertical also has good pipeline and opportunity.

  • The company has well-oiled sales and delivery team which has enabled to win deal consistently in the past 5-6 quarters.

  • Deal pipeline for 2020 is promising and conversion rate is expected to be good.

  • It does not see any headwind in any segment or geography barring one where ownership was changed and the company is relooking at its outsourcing strategy. Excluding that revenues should grow in high teens in FY 2020.

  • For FY 2019 it raised its revenue growth guidance from 21% to 24%.

  • New deals will have TCV of $ 80 million in incremental revenues in the next three years.

  • EBITDA margins grew in Transportation, Telecom and Hitech and process Industries verticals, It was constant for Industrial products and went down in medical devices vertical.

  • It has cash and bank balance of Rs 450 crore.

  • It is looking actively at more acquisitions.

  • Capex was Rs 51.1 crore in FY 2018 while in the 9 months of the current FY it is Rs 50.1 crore.

  • Realisation was Rs 64.19 to the dollar for the quarter against Rs 71.47 qoq and Rs 70.92 yoy.


At present L&T is holding 80.41% stake. Reducing 2.89% will bring it to 77.52%. Still need to reduce 2.52% to meet 75% promoter holding.

L&T has an option to reduce remaining 2.5% if the OFS oversubscribes. That will bring their stack to 75%. In all probability (Based on last OFS) it will be oversubscribed and L&T will be able to meet SEBI guidelines.


I am hugely surprised that a L&T flagship company, under a veteran like Shri A M Naik, launched an offer for sale without doing due diligence or without taking financial institutions into confidence. OFS was not subscribed by even 50%. This will definitely hurt the sentiments. The company is great and will reward the investors immensely in longer run but the OFS was not properly managed.

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I would not read too much into it. What it indicates is, LTTS is costly at current price. Last OFS @ 1400 was oversubscribed.

A client of L&T Technology Services Limited (LTTS), in the Telecom & Hitech reporting segment, has decided to assume ownership of engineering for their core product. Other engagements with this client continue and LTTS is in discussions to partner with the client in multiple adjacent areas, as they look to invest and expand their business.

As communicated during the 17th Jan 2019 earnings call post Q3FY19 results, on account of this development, LTTS’ annualized revenue will be impacted by around 4% starting March 2019, with no material change to the EBITDA margin. Notwithstanding the above, LTTS reaffirms its FY19 revenue guidance and its expectation of mid-teens revenue growth in FY20 in USD terms.

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I recently started tracking this company. I think it is unique company working on providing IT services in engineering area. Does anyone know any other company/competitor working on engineering? I know TCS/Infosys type of companies have also started working on IoT/Machine learning. But they are not purely into these technologies. These companies are training their existing employees to learn new technology. I need to understand about L&T TS in detail. But it seems they have expertise in providing technology solution in engineering areas. My personal opinion is that more and more engineering companies need automated solution and L&T TS will get more client. About valuation, it seems company is expensive at current valuation.

Disc- no holding, recently started tracking company.

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Tata Elxsi is closest competitor…not completely though!!

Great stock and superb direction that LTTS is taking. Issue is that it is part of the Nifty IT package that is showing correction with the INR being stronger. INR is the key to these technology companies, and also without EU and USD this company will not have the big contracts it needs to succeed. LTTS plays too many advanced technolgies, but I do not see them in the Gartner report today. Maybe someone can post the IDC or Gartner report for 2019.

Almost all the of the IT companies will says we are participating in “Digital Engineering, Cloud, Analytics, Artificial Intelligence, Machine Learning, Automation, Augmented and Virtual Reality, and Cybersecurity”.

It is becoming a crowded field. Although LTTS has unique capabilities.


LTTS can be a game-changer only if it focuses on 3 Ps…platforms products and patents…otherwise it’s just another services company with expertise in a particular vertical of engineering services…

Yes, the modularity elements that can be reused from customer to customer, patents and also productization of these reusable modules is the way to gross profit that translates to net profits. In the fast disruption model that we have, most of the IT services companies are facing the struggle of doing it fast enough with in the Agile environment.

LTTS chart scares me a little bit since it is staying in the bullish range for too long instead of letting the shorts win a bit and then scare them off. LTTS might correct so much with one small hiccup that it will shake the confidence of too many.

LTTS also has too many analysts on the Buy side. So, then, we have maxed out on buyers, and when we step on the sell for whatever the reason is, it will really start to dip.

LTIT on the other hand is just lacking volume of trade. This stock will not go anywhere since there is just a poor elements of float out there.

I hold both, so it is not like I want it to go down. But, I rather see it oscillating instead of staying in a tight range.



I see a lot of investors in this camp with a belief only in L&T companies that are in the IT world.

If they were so good and had a good handle on this ‘huge industrial sector’ called Information Technology, why would they venture into buying Mindtree. I know the reasons, and therefore, sold all of my 2600 Mindtree holdings since I had bought it at the low of the "IT is crap sector in 2016-17 at the support levels. Now, it is time for me to wait for a low in IT with INR getting to 63-65, when FIIs will start to unload. If it does not, it is OK since I hold INFY, TCS, Persistent, Tata Elxsi, LTI and LTTS.

4th Industrial Revolution is here now…It is IT.


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Stawan Kadepurkar, CBO, LTTS, speaks on the much-hyped 5G Technology & about the LTTS’ revolutionary nBIoT device ProtocolStack in this interview.

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