LTTS — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

MR. ABHISHEK – COO, · MR. RAJEEV GUPTA – CFO,

MR. RAJEEV GUPTA – CFO, MR. PINKU PAPPAN – HEAD, INVESTOR RELATIONS L&T Technology Services Q1 FY22 Earnings Call July 14, 2021

Disclaimer

Certain statements in this release concerning our future growth prospects are forward-looking statements, which involve number of risks, and uncertainties that could cause our actual results to differ materially from those in such forward-looking statements.

L&T Technology Services Limited (LTTS) does not undertake to update any forward-looking statement that may be made from time to time by us or on our behalf.

Moderator · Conference Operator

Ladies and gentlemen, good day and welcome to L&T Technology Services Ltd. Q1 FY22

Questions and answers

Moderator · Conference Operator

Thank you very much.

We will now begin the question-and-answer session.

The first question is from the line of Alroy Lobo from Kotak Investment Advisors.

Please go ahead.

Alroy Lobo

I have about three questions.

The first one is on your client profile.

You have about five $20 million clients, about twenty $10 million clients.

I just wanted to know what is the potential to which you can mine this client.

Can there be $50 million accounts, $75 million accounts or do they get capped at around $30 million - $35 million?

So, that is my first question.

The second question is to relate with your progress on the ISV business and the telecom business.

If you can just give us some update on what progress you have made to build capabilities, more capabilities in these two spaces and just wanted to also check with you as far as going forward in terms of the growth trajectory, are you seeing increased spending and more of the captive business coming into the outsourcing market in the ER&D space?

Could you comment on that?

Thank you.

Amit Chadha

So, number one.

In terms of the client profile as you see it, we definitely feel that we can actually, it is normal in our business to actually have clients that are more than 50 million as well, right?

So, you are not capping off at 30 to 50.

In fact I go back three years and we used to have a couple of clients in that range.

So, having said that there is a clear mining focus in the company, account mining, there is a hunting focus in the company, and we continue to work on this.

The reason the metrics in Q1 do not look up to you right now is because we use trailing 12 months of revenue to be able to report the client range.

But as we move forward and the FY21 metrics gets, revenue gets flushed out and the new revenue comes in as you see it, you will see the client pyramid improving.

This is a core focus area for the company and will continue to be one as we move forward.

In fact we had talked about a T30-A3 strategy - that has not gone away.

That continues to be the case as we move forward.

Your second question was on capability building in Hi-tech and ISV, so as far as we are concerned, Hi-tech for us is actually 6 sub-segments.

There is Semiconductor, there is Telecom infra, there is Telecom operators and Communication media; there is Consumer electronics; there is ISV.

So, those are the sub-segments we operate in.

5G is one of those areas which will cut across a lot of these sub-segments and is a clear attention and focus area for us as we move forward including the company that we bought last year and the Semcon building capabilities we have got through acquisition, VLSI design capabilities that we have got in in-house as well.

Having said that, on the ISV side, software capability continues to be something that we are building on, be it product cloud, be it cyber security, be it DevOps, SecOps, be it UI UX, etc. so these are capabilities that continue to be built out in the company.

And as we move forward you will continue to see progress in these areas.

We have also taken ISV and actually broken it up into focus on Medical, focus on Industrial etc. So, there are use cases that we have built out in L&T Technology Services Q1 FY22 Earnings Call July 14, 2021 the software side to take to the market, and we are fairly comfortable and confident that you will see growth here.

Can you repeat your third question?

Alroy Lobo

The third question was to do with the outsourcing in the ER&D.

Are you seeing an increase from the capitals or is it stable?

What is the trend you are seeing there?

And if I can just also chip in another question, Mindtree recently acquired the next digital business from Larsen & Toubro.

I would have thought that this made better sense for LTTS.

So, if you can comment how are these acquisitions being made at the group level, how do you connect with the group to make sure that some of these actually come into your place rather than going to one of the other group companies?

Amit Chadha

So, let me address the growth part.

So, as we look at it and these are numbers that are publicly available, the ER&D space today is about $1.4 trillion as of 2020 spend.

Of this $1.4 trillion it is supposed to grow to anything between $1.75 trillion to $1.95 trillion by 2023.

Now, out of this 1.4, that is as of CY20, $80 billion is outsourced to engineering service providers and India gets 16 billion of that $80 billion.

Global competency centers or captive centers is about $50 billion of spend out of which similar $16 billion - $18 billion comes to India but there is an equal amount going to China and then there is Latin America etc. As we see going forward, we do expect ER&D spends to grow.

We do expect outsourcing to engineering service providers like ourselves and others in India Inc. as well as western Europe, eastern Europe to grow, we also expect global competency centers to pick up.

Having said that, you may see some more global competency centers spend going to eastern Europe and LATAM and China slowing down from a global competency center standpoint.

So, that is broadly the contours that we are seeing it today and there is interest and further details that we can get into, but broadly that is where it is.

If I go on to L&T-NxT being bought over by Mindtree, so L&T-NxT has some very targeted products, reusable widgets they have built in the areas of digital for construction companies which is being used by L&T and the group thought that Mindtree acquiring it was the right answer.

Having said that, I cannot comment on that being right or wrong.

What I can say is we have a clear strategy in the 6 investment areas that I have outlined for you, and we do believe that that growth will stand us in good stead sustainably, profitably as we move forward.

Moderator · Conference Operator

Thank you.

The next question is from the line of Sandeep Agarwal from Edelweiss Financial Service.

Please go ahead.

Sandeep Agarwal

I have only one question, Amit.

We are in a situation where the demand from the consumer side is at very high.

Factories have not worked to their optimal levels.

So, there is a big gap between demand supply across the globe on the consumer side.

The outsourcing of the ER&D has to go up tremendously because ER&D has not gone through the outsourcing which the software industry has gone through.

On top of that there is severe scarcity of manpower in whole of Europe and if you add to that our market leadership, our capability in each of these areas and also the world’s urgency and desperation to upgrade the feature products into smart products, if you take all this 5 things together and even if you apply a very pessimistic approach to that then also it looks like you are getting into a golden decade of growth in your business.

So, why that kind of confidence is not reflecting in our commentary?

Is it because we are not so sure about L&T Technology Services Q1 FY22 Earnings Call July 14, 2021 any third wave or fourth wave impact which can happen because of COVID or it is because that you are still finalizing your strategy and you would be more opening up or would be giving more clarity going forward because no way I am able to reconcile this that when there are 5 huge tailwind, I have not thought of this kind of tailwind, I don’t think such huge tailwind has ever come together in last 20-30 years, then why our commentary is not reflecting that same optimism?

Thank you.

Amit Chadha

So, Sandeep, two things here, so that we can level up and be clear.

Number one, I share your optimism around demand, your optimism around 5 vectors that you talked about.

Having said that, Sandeep, you will agree with me that there is only a certain amount any company spends in any given year.

That is one.

Second is that, given that if you look at the 6 strategic investment areas I talked about and during our investor day we’ll share more color, these are not quarter bets.

These are bets that are made for the next 3 years, 5 years.

And that is what we have done, that we have taken all these 5 tailwinds that you talked about, and there are tailwinds per sector, and we have created this investment roadmap for ourselves in 6 areas which we believe will give us the sustainable trajectory as we go forward.

So, we are taking that into account.

Having said that, let me then focus only on the year.

On the year so far, we have already upgraded our guidance to 15%-17%.

We will come back and update you as we move forward into next quarter on where we stand and we will continue to be honest, direct and transparent with you because we really treasure our relationship with this community.

So, that is where we are at this stage.

But we mirror your sentiment in terms of tailwinds and we will continue to provide an update to you.

Moderator · Conference Operator

Thank you.

The next question is from the line of Mukul Garg from Motilal Oswal Financial Services.

Please go ahead.

Mukul Garg

Amit, first, just wanted to get a bit of an understanding on the Q1 performance.

It clearly looks like it was better than what you initially expected especially the COVID supply impact.

So, can you just highlight whether it was supply or demand which materially moved the performance this quarter and then how do you see it play out currently as you enter Q2?

Amit Chadha

So, number one, when we met last time in May, we met under the shadow of a wave-2 that was rearing its head up, if you remember that and that played on our minds as to where we are.

I do want to acknowledge that we have also had fatalities like everybody else in our workforce.

We have workforce that has been infected.

And like I said in the beginning of my commentary, things have gone through very harrowing times for our employees and their families, and I am sure you will understand that.

So, we took that into account when we had given you commentary last time.

At this stage where we stand today, we are fairly comfortable with the fact that wave- 2 is done.

We hope and wish that the wave-3 will not be as bad because vaccinations are going up.

We are actually getting our employees vaccinated, their families vaccinated etc. Demand is there.

So, in fact if anything demand has slightly improved, spend has slightly improved and that is why I said this is a progressive quarter, let’s go through it.

I have also acknowledged to some of you in parts as well as through the whole team on this call that our internal targets are there, that we continue to try and achieve to and aspire to.

We haven’t forgotten years when we have L&T Technology Services Q1 FY22 Earnings Call July 14, 2021 grown higher in the past years and our aspirations will be the same.

But again at this stage this is where we are and that is what we wanted to communicate to you.

Mukul Garg

And on the demand side, you mentioned demand environment is good.

We heard recently from ISG also that deal sizes in ER&D space are increasing.

But at the same time, we are also hearing about increased competition with Accenture highlighting it as the focus area.

So, both from deal size perspective and competitive perspective, is there any change which we have seen in last 2- 3 quarter or things remain the same?

Amit Chadha

So, number one we would be definitely seeing is that clients are willing to talk and commit to larger spends and longer spend cycle spends, so like TCV of 3 years they are willing to sign a document.

About 4 months-6 months ago there was a little bit of trepidation they do…don’t want to do that etc. So, we are seeing a lot of more confidence back in the market in terms of making commitments.

Number two, longer term commitments and bigger commitments.

So, that is definitely one that we have seen.

That is how we won the two deals in EV etc. onwards, right?

Second, we are looking at clients making strategic decisions in terms of…I want to be able to get to 5G rollout in subsector A, use case A and B etc. or, I want to get to electric vehicle.

The electric vehicle I have broken it down.

I will first do the power distribution unit.

I will next get to higher end wiring.

I will then get to inverter design.

There is a bit of clear phases people are drawing out as if this is a multi-quarter or multi-year thing rather than sprint, which is very heartening because you are having a longer-term conversation that provide more strategic direction and more warm and fuzzy with clients.

In fact I am happy to share I have completed first set of face-to-face meetings in the last 4 weeks and so has some of my leaders in the geographies where we operate out of.

So, stuff is coming back and that provides us that confidence.

The third thing we are seeing is, specific areas that have picked up interest and pace, like electric vehicles has picked up pace, 5G has picked up pace, sustainability has picked up pace, changing the composition of fuel, right…to higher mix, higher value mix has picked up pace.

So, that gives us a lot of confidence as we move forward and this is not the case, if I may be very clear, this was not the case 5 months ago or 4 months ago.

Moderator · Conference Operator

Thank you very much.

The next question is from the line of Sandeep Shah from Equirus Securities.

Please go ahead.

Sandeep Shah

Just on margins, one of the tailwinds which we have witnessed, which we have said that the portfolio mix has been shifted more towards digital engineering as a whole.

So, on a Q-on-Q basis, yes, it has gone up by 200 basis points, but we never called out this as a tailwind on margin in earlier quarters.

So, is it the pricing, which is going up on digital engineering, or is it the margins within the digital engineering are now different in first quarter versus what it is used to be earlier.

And will it be a sustainable structural tailwind going forward?

Amit Chadha

I will request Rajeev, Abhi to add from Mumbai here.

But it is not just one factor, it is multiple factors that have played to this.

Rajeev, Abhi, would you like to add to this?

L&T Technology Services Q1 FY22 Earnings Call July 14, 2021

Rajeev Gupta

Sure, Amit.

Let me add to it.

So, there are various factors that have led to the improvement in margin, right?

One is of course the growth in the quality of revenue.

Things like digital engineering and the increase that you talk about, these are things that take a little time to play out.

More importantly it is the quality of revenue that is beginning to now aid margin.

And in terms of the sustainability, we still feel that there are opportunities, for instance you know growth and scale of revenue will bring in economies across cost and that is around sales, communication, legal, all of those cost.

Segmental margins, we talked about it earlier as well.

We have got opportunities in two segments, Transportation and Telecom & Hi-tech.

Transportation we are already now seeing EBITDA margins go up to 19% plus range.

Telecom & Hi-tech it is taking us a few quarters.

We are focusing and working towards it.

We should hopefully be able to see better margins in Telecom & Hi-tech in the next few quarters.

Further opportunities also in terms of improving employee pyramid.

We have started to hire a lot more freshers over the last two quarters and we believe this strategy will help us in building the employee pyramid and also in a way try to bring down the C&B cost as a percentage of revenue.

These are some of the factors that we feel will help us in terms of sustaining the margins going forward as well.

Sandeep Shah

And this follow up question, are you trying to say that in the coming quarters, will we be able to sustain the current quarter margin or we may further improve it, rather than any decline despite a partial wage hike which is pending, that is what we are guiding from 3Q to 4Q?

Rajeev Gupta

I called out the various factors and of course the levers that are available in terms of sustaining margins.

Of course, when you look at various factors, we still need to see the performance in terms of revenue.

Amit talked about the improvement in terms of guidance from 13 to 15, raising it to 15 to 17.

So, some of these we still need to see in terms of the execution.

Like I said in my opening commentary, we continue to remain focused and we will see how best to sustain the margins that have been delivered in Q1.

Moderator · Conference Operator

Thank you.

The next question is from the line of Hiten Jain from Invesco.

Please go ahead.

Hiten Jain

I have two questions.

First is, I think you touched upon in the opening remarks, maybe if you could still clarify some more on the receivable days going up and especially the unbilled part, what is leading to that?

Rajeev Gupta

So, we went through a system transformation program in Q1. We kicked off the first phase that led to delayed invoicing.

We believe this is temporary as you would have noticed all of last year we improved DSO and consequently we improved free cash flow.

Q1 of course is a temporary…I would say situation.

We will improve this in the coming quarter.

The system transformation should conclude over a quarter or so.

So, Q1 is only a temporary position so to speak.

Hiten Jain

And the second question is on the headcount growth.

So, we are operating at higher utilization levels, and we are seeing good demand in terms of commentary and potential deal winds.

But headcount growth seems to be muted even sequential and obviously on year-on-year basis.

So, what are our hiring plans going forward?

L&T Technology Services Q1 FY22 Earnings Call July 14, 2021

Amit Chadha

So, we don’t normally comment on exact headcount addition.

But what we will definitely tell you is that, as you can see, the headcount has gone up by approximately 700 people.

This was partly freshers, partly laterals.

Going forward the plan of the company is to continue to hire about 400 to 450 freshers plus laterals every quarter.

Now of course there will be attrition, there will be exits.

So, you will continue to see net increase, but we don’t provide guidance on exact number headcount increase quarter-on-quarter.

Rajeev, Abhi, if you want to add to this, you can please.

Rajeev Gupta

No, I think it is clear, Amit.

Moderator · Conference Operator

Thank you.

The next question is from the line of Nitin Padmanabhan from Investec.

Please go ahead.

Nitin Padmanabhan

On the Transportation side of the business, the margins there seem to be at the higher end of what you have done historically.

Just wanted your thoughts in terms of what changed between the transportation mix that is actually driving this margin up.

Is it the mix in terms of the kind of business that we are doing or is it that or what exactly is basically driving this margin up and how sustainable is it?

MR. ABHISHEK – COO, · MR. RAJEEV GUPTA – CFO,

Thanks for the question.

I think one is from a sustainability perspective of course that is what our intent is.

Why have the margin grown up so much, the quality of revenue has definitely improved.

Our business in transportation sector especially in the software embedded side has shown very good improvement.

So, growth is one of the primary reason I would say for this and growth in the right areas and with higher, better quality of revenue.

Nitin Padmanabhan

So, when we say better quality of revenue, if you could just give some color what that means?

MR. ABHISHEK – COO, · MR. RAJEEV GUPTA – CFO,

Our investments like Amit said at the start, one of the big bets we have is on the EACV segment which is electric vehicle, autonomous areas, and we clearly are seeing more growth in those areas, more wins in these areas, e-powertrain areas and that helps of course the investments we have made in the reusable solutions, the EV labs that we spoke of in the earlier quarters those are also helping us attract more customers and growth.

Moderator · Conference Operator

Thank you.

The next question is from the line of Vibhor Singhal from PhillipCapital India Private Ltd. Please go ahead.

Vibhor Singhal

Two questions from my side.

Sir, the first question that I wanted to take your opinion on is if you look at our total revenue we have now crossed that $200 million revenue quarterly run rate.

This is where we were in 3Q FY20, so around 5 quarters back.

So, basically the COVID led to a drop in 1Q and from there it has been a V-shaped recovery.

So, just wanted to check that now that we are now back to those 3Q FY20 levels, are majority of our clients also back to their pre- COVID levels spending for us, or is it that in the meantime we have gained new customers and new businesses and many of the large clients are still much below their pre-COVID levels and L&T Technology Services Q1 FY22 Earnings Call July 14, 2021 that basically backlog or that revenue is yet to be gained by us which can be a potential growth area for us for the next couple of years, for next few quarters maybe?

Amit Chadha

Thank you so much.

And some of you, tracked us and been with us since we went IPO and prior as well.

So, we appreciate the confidence.

Having said that, as you will recall, we touched close to $200 million in Q3 of FY20 and from there we declined right because of COVID in quarter 4 and then we have come back like you said.

What has changed is two things.

Number one is pre -COVID, I am going to get a little specific here, right.

So, then I will come to accounts as well.

So, pre-COVID the amount of conversation on electric vehicles was not so much there and autonomous it is largely a lot of infotainment and autonomous.

But post-COVID we are seeing a lot more conversation, money being spent in electric, autonomous and connected.

Cyber security is another area that’s added on in Transportation.

As an example, pre-COVID there was not a lot of spend in Medical in the areas of telemedicine or in home care.

And those two areas are picking up speed as we speak now post-COVID.

Third, Digital manufacturing was a conversation pre-COVID, post-COVID we are seeing money being spent in that.

The point I am trying to make is that the color of the dollar has definitely changed, the conversations have changed, digital as well.

And digital is a very broad world, so I don’t want to go there.

I am engineer, so I don’t want to just say digital but that is where it is.

So, color has changed.

In fact, our global engineering institute that we have set up which Abhi as well as people he had hired set up has been instrumental in turning the color of even some of the talent that we have got.

So, that has been a change.

So, it is not like go back to the same old etc. Second from a client’s standpoint, if I look at our 30 million run rate clients or I look at my 20 million run rate clients, that has fairly been the same...couple of them have dropped off for various reasons, we had already told you that one of them had sold their 5G business, one of them had divested to a private equity.

But we have seen a fair mix to be steady and grown with us.

So, somebody had asked a question, are clients getting deeper with you?

The answer is true, the clients are getting deeper with us.

Having said that the word of caution, that I would definitely want to say because we want to be honest and whatever we see we want to tell you.

What we don’t know is will wave-3 comeback in a much bigger way?

We are seeing hospitalizations down, even though infections are up in Europe.

Decision making is almost back to normal.

But will this continue…there are some variables that nor do you have an answer or nor do we.

But we will continue to stay engaged and tell you.

But I can tell you that your company for sure have seen a change in the type of work we are doing, and we are confident that we have the right talent and the processes in place to scale up in that area.

Long answer, I hope I have addressed what you have asked.

Vibhor Singhal

I just got one more question.

You mentioned that in the Plant Engineering segment, we had a deal with an FMCG client for whom we designed the entire new plant with the most stringent of norms.

So, to get a color on the segment, was that a one-off or are we seeing FMCG companies setting up more and more plants across the world and there are more conversations happening in that segment?

Amit Chadha

So, there are two things that we are seeing, and I will again breakup the segments for you.

So, if I look at food & beverages, we are definitely seeing a trend of smaller plants coming up.

So, that L&T Technology Services Q1 FY22 Earnings Call July 14, 2021 means smaller capex coming up that are more regional, that are supplying to the demand in the region as opposed to mega plants.

So, that in food & beverages we are seeing.

Now, is this a trend that will hold?

Is it a trend that will change?

Don’t know.

But right now we are seeing that.

It was there in Asia…there were mega plants in the US and Europe while there used to be smaller plants in Asia.

Now we are seeing smaller plants in US and Europe as well coming up as opposed to mega plants.

One food & beverages, you are seeing that, I don’t know how long that will continue.

Second what we are seeing is, in Plant Engineering that Oil & Gas companies are coming back and talking to us about changing their fuel mix.

So, the output that they give will be less gasoline, will be more jet fuel, maybe more chemicals etc. So, there is brownfield upgrades and changes people are talking about.

So, I do believe that that is again different than what we saw about 4-6-8 quarters ago.

So, those are the two changes.

Moderator · Conference Operator

Thank you.

The next question is from the line of Mayank Babla from Dalal & Broacha.

Please go ahead.

Mayank Babla

Sir, while we have seen an addition in headcount during the quarter, the sales and support headcount has fallen from Q4 to Q1. So, if you could shed some light on that and related question to that was that, will this see a reversal in the upcoming quarters, if we have to see that growth surpassing that 20% mark going ahead?

Amit Chadha

I am going to request Rajeev to take that.

But on a principal basis I want to tell you that it is not like we have fired sales people or support just because the revenues went down.

We haven’t skipped on that.

But we have optimized for sure, but I am going to request Rajeev to take this question.

Rajeev Gupta

Sure, Amit.

Mayank, to respond to your question, we continue to invest in our sales organization.

When you look at sales and support, it is not that it has taken a big drop.

This is just part of the thinking ahead in terms of how do we work more effectively.

So, to put it in a short context, we continue to invest in sales because we have seen the opportunity with the kind of demand, we would like to see investing into sales functions so that we can see further growth coming in newer and newer accounts and also being able to expand on our current set of accounts.

It is just that we are trying to manage this more effectively, more on the enabling side.

Moderator · Conference Operator

Thank you.

The next question is from the line of Udit Methi from Stanley-Laman Group.

Please go ahead.

Udit Methi

I just wanted to ask, during your performance highlights I could see that an American automotive has selected LTTS as strategic partner for their EV and power electronics product.

So, I just wanted to understand that due to this lack of suppliers for semiconductors and things like that, are you guys planning to ramp up your production for this because I see that this is a big opportunity that we could jump on, and do you plan on any CAPEX expenditure in terms of power electronics?

L&T Technology Services Q1 FY22 Earnings Call July 14, 2021

Amit Chadha

So, number one, to answer your question, we do not do manufacturing.

We are largely focused on design, sustenance engineering.

So, therefore the chip shortage is not impacting us per se.

If anything, design cycles are where they were etc. so we don’t see that.

Do we see overall an opportunity with chips and FPGA and the likes in the Automotive sector, absolutely yes and we are continuing to hire, build, train, cross train all of those to positively take advantage.

In fact our whole strategy around multi-vertical strategy is paying out well for us because we are able to leverage getting semcon design wins in automotive etc. on and on and on.

So, that is definitely there.

Moderator · Conference Operator

Thank you.

The next question is from the line of Pritesh Vora from Mission Holdings.

Please go ahead.

Pritesh Vora

Amit, you have highlighted that US government is investing in infra-led investment, what do you see impact in which of the vertical this will play out over next 5 or next decade?

And second question is how private investment climate is shaping up in USA?

Amit Chadha

First of all, I apologize.

The line had got cut.

This time around other than mobile, I had asked them to connect me on landline.

So, as you can see mobile is more effective than landline.

So, we will keep this as a lesson for the future.

Thank you so much, again apologize.

Now, if I go back to the spending, see the US government talked about and last time I had covered that.

They talked about infra spending.

That will impact us in the areas of Trucks and Off Highway for sure because companies like Caterpillar, John Deere others will benefit from that.

Second as infra improves, automotive itself will benefit.

Third because of green energy, electric vehicles etc. we expect that to continue to grow.

So, that is space #1.

Now #2 is, because of climate green energy etc. people are talking about, this whole Industrial Product sector that we have got, digital manufacturing as well as sustainability are three areas that will see an upswing in terms of spend and attract investments etc. If somebody is interested you can actually see that the number of wind turbines on the shores of the US is going to go up drastically and interestingly the problem is not that wind turbines cannot come to the US, it is also because there is a shipping law that requires ship to be of a certain type or owned by certain people that can only bring the submarine into the sea.

It was very interesting when I read about it.

So, the whole ships are being built to try and transport it.

So, very interesting whole ecosystem coming up.

So, I do believe that will help for sure.

Third, I do see spending in private sectors changing with the chemical, actually you can go google it, Exxon has talked about it.

Look at the fuel mix that they are saying will happen in 2030 coming out of the refineries as opposed to what is coming out today.

There is a huge change in that that will require refineries to be changed and I believe that is a spending area.

Fourth is, the recent act that the US passed called the innovation and competition act.

It is a $270 billion plan which is, part of it is Chips for America Fund, there is technology directorate getting money.

There is department of energy getting money.

There is a competition around digital connectivity, cyber security, so we may directly not get revenue from it.

But my belief is that that will build an entire ecosystem and we will be participative in this ecosystem and will help us.

Finally, one thing not going away which is US, Europe, in fact India as well is that, and I am going to say this because a lot of my colleagues from finance and others on the call, I often say that people that could afford to buy a Montblanc pen five years ago, will definitely spend L&T Technology Services Q1 FY22 Earnings Call July 14, 2021 money on a small blood pressure monitor 5 years from now.

So, you will see home healthcare definitely go up.

So, I believe that there is avenues of opportunity.

Now what is to be seen is what is the pace of that that is going to come out; how much of it companies will do themselves; how much of that will be coming to people like us; will we be able to ramp up to be able to build that capability; do we have reusable assets, a lot of that going on.

A long answer but that is how we see it.

Moderator · Conference Operator

Thank you very much.

I now hand the conference over to Mr. Pinku Pappan for closing comments.

Pinku Pappan

Thank you everyone for joining us on the call today.

We hope we have been able to answer most of your questions.

If you have any follow up queries, please write to me an email.

Also, I look forward to hosting all of you on our investor Analyst day coming in September.

We will communicate the details very shortly.

Thank you again, have a good day and wish you safe times.

Amit Chadha

Thank you so much.

Moderator · Conference Operator

Thank you very much.

On behalf of L&T Technology Services Ltd. that concludes this conference.

Thank you for joining us.

You may now disconnect your lines.

Thank you.

Note

This transcript has been lightly edited for clarity and accuracy.