L&T Infotech profit remains flat as salaries eat up nearly two-thirds of its revenue

• L&T Infotech reported flat profit growth in the June quarter despite a moderate increase in revenue.
  
• The IT service provider’s margins came under pressure from rising salaries and travel costs.
  
• However, it signed four new global Fortune 500 companies, taking its tally to 77.
  

L&T Infotech, the IT services arm of engineering giant L&T, today reported a flat net profit in the first quarter of FY23 after salary hikes, travel costs and supply side issues bogged its margins down.

It reported a net profit of ₹634 crore for the June quarter which was lower by half a percentage point compared to the March quarter. On a year-on-year comparison though, it increased by 28%.

Particulars	Q1 FY23	Q4 FY22	Q1 FY22
Revenue	₹4,523 crore	₹4,302 crore	₹3,463 crore
Profit	₹634 crore	₹637 crore	₹496 crore
Margin	14%	14.8%	14.3%

Source: Company reports

Overall, its employee benefit expenses increased to 63% of the revenues as compared to 58% in the previous quarter.

The company’s attrition rate also improved only marginally in the last 12 months to 23.8% from 24% in the March quarter. Its total headcount stood at 48,766, up from 46,648 in the previous quarter.

It however said that it added four new global Fortune 500 companies to its client list in the first three months of FY23.

“We added four Global Fortune 500 logos to our client list in Q1, taking our total Global Fortune 500 customers to 77. We are also happy to announce four large deal wins during the quarter with net new total contract value (TCV) of $79 million,” said Sudhir Chaturvedi, president sales and L&T Infotech.

North America remains L&T Infotech’s primary market, with a contribution of two-thirds to the company’s total revenue. India, on the other hand, is just a tenth of the North American market.

On a sequential basis, the Indian business shrunk nearly 16%, and despite the recession concerns in the US, the North American market’s share grew 5.5%.

Geography	Q1 FY23	Change (QoQ)
North America	67%	5.5%
Europe	16.6%	-0.8%
Rest of the world	9.6%	-2.6%
India	6.7%	-15.8%

Source: Company reports

What should ring alarm bells for the company is the sequential decline in all segment results except BFSI and retail. Energy and high-tech segments declined the most, followed closely by manufacturing.

Segment	Growth	Result
BFSI	4%	₹404 crore
Manufacturing	-12%	₹146 crore
Energy	-14%	₹59 crore
High tech	-14%	₹88 crore
Retail, CPG and others	5%	₹143 crore

Source: Company reports

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