Winter for the general engineering R&D (ER&D) space is over and spring may be around the corner, said the management of L&T Technology Services (LTTS) in its Q3FY24 earnings call. This optimistic outlook, the company believes, is not limited to LTTS but extends to the broader industry. A bold statement, despite prevailing global economic uncertainties and a cautious stance from top-tier IT companies regarding near-term demand.
In the third quarter, LTTS, a tier-2 IT firm and a specialist in ER&D, reported a revenue growth of 0.9% in constant currency (CC), missing analysts' estimates. However, the company remains upbeat, confident of achieving 17.5-18.5% year-on-year (YoY) revenue increase in CC for FY24. It's worth noting that ER&D, involving development and enhancement of products and services, is quite susceptible to economic fluctuations.
LTTS provides a range of services, including consultancy, design, development, and testing, covering the entire product and process development lifecycle. Contrasting LTTS’s stance, Infosys recently adjusted its FY24 CC revenue growth forecast, tightening it from 1-2.5% to 1.5-2% year-on-year. Similarly, HCL revised its forecast from 5-6% to 5-5.5%, and Wipro projected a -1.5% to 0.5% quarter-on-quarter CC revenue growth for Q4 in IT Services, which is lower than some analysts’ estimates.
But the LTTS management seems fairly certain of achieving the lower end of revenue growth guidance. This would be aided by factors such as lower furloughs, higher working days in Q4 and an immediate ramp-up of deals won in Q3. According to the management, the deal pipeline continues to be robust with multiple large deal opportunities.
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