LTTS — earnings call

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Prepared remarks

Moderator · Conference Operator

Ladies and gentlemen, good day, and welcome to L&T Technology Services Limited Q4 FY23

Questions and answers

Moderator · Conference Operator

The first question is from the line of Bhavik Mehta from JPMorgan.

Please go ahead.

Bhavik Mehta

Thank you.

A couple of questions.

Firstly, on the guidance.

If I look at organic guidance at 10%, seems a bit weak, given the momentum we have seen in four of the five verticals in the 4Q numbers.

So can you just throw some more light on what kind of headwinds are you expecting going into FY24, which has led you to come up with a weak guidance at 10% on an organic basis?

Secondly, on SWC, it seems like the revenues were just $100M in FY23, while the FY22 number, what you had shared, it led to revenues of around $140-150M.

So, has SWC seen revenues contract over the last year?

Just a clarification on that.

And lastly, can you just talk about this DOJ settlement, what you paid of around $10M, more color on that in terms of what is it related to some one or two clients or was it across multiple clients in the US?

And what has been the reaction from the clients because of the settlement done by you? © L&T Technology Services Q4 FY23 Earnings Call April 26, 2023

Amit Chadha

Yes, hi.

Thank you so much.

Number one, I believe that what we've guided is 20% plus with the focus on the word ‘plus’, right?

And we are just starting the year.

We are not declaring FY24 results yet.

I do believe and I have a lot of optimism as I enter the year.

If you look at it, there are three clear areas where we're seeing money is being spent, Energy Transition & Electrification, Digital – which includes Cyber, AI, Automation, Connectivity, Computation and Cloud adoption.

And finally, a lot more outsourcing and offshoring.

So at this stage, given where the world is right now, I do believe that we're very confident in this 10% plus across segments.

The two areas which are a little bit of a concern to provide a balanced view here or Semcon and hyperscalers.

Our exposure to hyperscalers is very limited.

And in fact, the areas we're working with them on are seeing expansion.

Semcon, of course we had a decline in the current quarter, but we overcame that.

And in spite of that, Telecom and Hitech grew 4%.

So that's where we are on that.

With regards to the -- and I will hand over to Rajeev on the SWC part.

But on the DOJ part, as we had outlined in the press release that we did, this was a settlement without admission of guilt or liability.

And this was for some stuff that came to our notice for the past.

It is behind us.

We have put in very strong controls, including having a general counsel appointed in the USA, and a strong team and processes to back this up.

Our clients have been very supportive to us.

And if anything, what we have taken away is that they have appreciated our transparency, our strong processes, and the way we have been working with them and conducting ourselves over the last few years.

Rajeev, with that said, if you would like to add color on SWC.

Rajeev Gupta

Thanks, Amit.

Bhavik, let me address the question on the SWC revenues.

So in respect of SWC revenues, the portfolio of contracts that we've taken over from L&T aggregate to ₹ 800 crores in revenue for FY23. We will consider this to be the baseline.

These are also contracts that are strategic in nature and will result in better performance for LTTS combined in future.

Amit Chadha

I would also like to confirm that the DOJ settlement has had absolutely no impact on any of our customers or any deals or conversations.

Moderator · Conference Operator

Thank you.

The next question is from the line of Akshay Ramnani from Axis Capital.

Please go ahead.

Akshay Ramnani

Hi, thanks for taking my question.

So, first question was on SWC.

So, you mentioned about getting into asset-light deals.

Would you expect that process to be a headwind on revenues as we transition?

And if yes, how long do you expect the transition period to continue?

And also you had earlier mentioned that some of these Government contracts have come up for renewal over the next 18 months and in most likelihood you may not go ahead with renewing those contracts.

So are we on track?

And what percentage of revenues can those contracts be?

Amit Chadha

Okay.

Thank you so much, Akshay.

Number one, as we have said, SWC is three parts.

There is Telecom which now we have integrated completely into our Comms, and we are calling it Next Gen Comms.

In fact, you see our website, may have either been changed or will get changed from 5G to Next Gen Comms.

There, we are seeing 2 areas of spend.

1) We are © L&T Technology Services Q4 FY23 Earnings Call April 26, 2023 seeing a lot more 5G trials going on.

And therefore our business in that area has picked up with a couple of old Telecom Operators that were our customers in North America.

2) There are customers that are coming out with devices that can get rolled out into tunnels, into large expanses or campuses, etc. and they are asking us to test those devices, look at the hardware, look at the firmware, look at the software layer, etc. and we are again leveraging that.

That is a second sub-part of what's happening in Telecom Hitech.

These are the asset-light deals that we're talking about with our pure play services that we're getting involved in globally.

Like I said, we announced one deal with 5G.

We announced one today masking the customer's name.

And as I go forward, you will see a lot more exciting wins in this area because the pipeline is great.

Second is Cybersecurity.

It was very small for SWC.

It was a bigger part for LTTS.

However, they had an asset called SOC – which is a Security Operation Center in Chennai, a physical asset which we have taken over, which is basically a building with computers, algorithm etc. Now the advantage of all that is that we have already got 2 wins in that area.

We are very close to getting a 3rd and 4th win in that area and signing up go-to-market partnerships with customers & with providers that will differentiate us.

So that is again asset-light, a lot more to do with services.

The Third part is Smart Cities.

And there we are trying to diversify from Smart Cities to Spaces.

That will include airports, will include campuses, buildings etc., and we were doing buildings already.

Again, the whole goal is to move to a master software systems integrator, right?

These will be deals that will have a bigger technology quotient and that's how we see this coming together and we're very pleased with the progress we've made in the last two months.

Now the other thing on the Government contracts is that the Government contracts are all time- bound.

You do a project, you get an extension, you get the next bid and we are working through those as we progress.

Rajeev Gupta

I can add to that.

Akshay, so most of these Government contracts, right?

And in the current business, the entire revenue is on Government contracts.

Now these contracts had a high Capex element to start off with and now we are entering into the Opex or the services part on these contracts.

So when you talk about renewals, it is not that we will turn down the renewals.

We will still do renewals more on the services part of it or the Opex part of it.

So it should actually be a plus factor as we move ahead.

Akshay Ramnani

Okay.

Got it.

If you can also touch upon will this transition period have a revenue impact?

And my follow-up question is to Rajeev, you mentioned about getting to 17% margins in FY24. You had earlier talked about that 180-200 bps impact in Q1, also Q2 is a typical wage hike quarter for LTTS.

So, does that heavy lifting happen in H2?

Or how are you thinking about the quarterly progression of margins?

Amit Chadha

Number one, we have taken into account transition, the contracts that are ending, new contracts coming, pipeline, internationalization of the pipeline.

In fact, the sales team for the entire SWC related businesses have already been hired.

They were brought on board right after we announced the acquisition in January and then we hired them in anticipation of closure.

So, © L&T Technology Services Q4 FY23 Earnings Call April 26, 2023 they're already on board and already productive, right?

So, we've taken all that into account when we've given you this 20% plus guidance.

And as we go through the quarters and as things change, we'll continue to update you as we have always updated you.

Rajeev Gupta

Akshay, as far as margins, in the previous quarter, I did guide that we'll see an impact of about 180-200 bps on EBIT levels.

I'm glad to share that it is now more narrow towards 180 bps. I already talked about that our aspiration for FY24 is to be in that 17% range.

Of course, internally, we will continue to push for higher achievement.

At this point in time, I'm just setting out what is the more realistic part, but we'll continue to play as it goes around.

Second part of it is the increments happen in Q2. So when I have shared this aspiration, it factors in the increment that will be rolled out in Q2.

Moderator · Conference Operator

The next question is from the line of Vibhor Singhal from Nuvama Equities.

Please go ahead.

Vibhor Singhal

Hi.

Thank you for taking my question.

And congrats, sir, on a very good strong growth on a broad-based level.

So, sir I think, Amit, I think I would just maybe touch upon this.

I think after many quarters, we have seen such a broad-based growth almost across all the segments.

You spoke about, a bit about the Transportation vertical.

So maybe a bit more on that, if you can just maybe give some light as to the reasons that we had QoQ dip in this quarter?

And do you think basically this could reverse in the coming quarters or the weakness might continue for a couple of them?

And a broader, larger-level question would be how are you seeing the overall demand environment?

We've always basically considered the ER&D spend as more discretionary in nature, given the overall weakness and slowdown in the US and European economies.

Are we seeing any impact on the deal flow or conversations with the clients or in terms of the pipeline that we are looking at in the near future?

Amit Chadha

So thank you so much, Vibhor.

Number one, I'd like to confirm, we don't provide QoQ guidance, but I always think of the investor community as part of the family and employee community of the company.

So, I'm going to dispel this fear and tell you that our growth in Q1 as projected today for Transportation is above 4% sequentially.

So I want to just dispel that notion that there was a problem.

What happened was that we had a jump in Q3 because some of our contracts started and we requested our clients and they agreed that they wanted some work to be done quickly, so we ramped up extra there.

And therefore, we stabilized, I would say, in Q4 is how I see it.

The good news is that, you've seen the deal wins that we've had in the current quarter, they've all gone operational.

And I am confirming to you that growth is back in Q1 in Transportation for sure, right?

And we are already into Q1, right?

If I look at demand, Vibhor, Electrification is a big spend area across US, Europe and Japan for Auto, and not just Auto, for Trucks and Off Highway as well.

And the new design cycle for Aerospace is starting up for hybrid aircraft.

So that bodes well for that sector. © L&T Technology Services Q4 FY23 Earnings Call April 26, 2023 Second, if I were to go to Industrial, people are asking the question two times when they place the order for sure, but we are seeing digital demand continuing to grow in that area as we see it today.

So I'm confident that this will continue into FY24 as well.

Third, I'll tell you where the issues are as well.

So Hitech, Semcon, there's a little bit of stress in the system for sure.

We've seen it in the current quarter.

We will see it in the Q1 also, but it's being overshadowed by spends coming out in the Telecom Operator and the Telecom OEM segment and M&E segment.

In fact, there's a couple of interesting deals going on.

Let's see when it gets closed.

But this will help us in growth in revenues in Q1 and beyond.

Plant, of course, continues to chug along.

CPG – a lot more smaller plants coming up.

In fact, you will be surprised a number of building, if you go and just get the data from the Government on the number of building permits and factory points that are being pulled by MNCs for India, it's just, flowing off the wall and we've already won significant amount of MNC-based contract to do engineering for their plants that they are building in India and Southeast Asia.

And that again is a very positive sign.

Oil & Gas, with oil prices where they are, continues to spend on Digital Transformation.

And Medical is the only area where we didn't do well, right, in the last year.

But given where we are in Q4 and the fact that now Europe and Japan – where we invested in these Geos for Medical has opened up, I'm fairly comfortable.

So net-net, I'm a little worried about Semcon and Hyperscalers.

But our exposure to Hyperscalers is not too much there.

So, I believe that brick-and-mortar will prevail.

As we always say, top line – vanity, bottom line – sanity, cash – reality, you will see a lot of these companies doing well and coming to rescue in this current year of FY24.

Moderator · Conference Operator

Next question is from the line of Rajiv Berlia from Citi.

Please go ahead.

Rajiv Berlia

Thank you for the opportunity.

I just want to understand what happened in other segments.

We see a good drop in the other segment line item around 190 bps QoQ?

Rajeev Gupta

Rajiv, could you clarify your question, what do you mean by other segments?

Rajiv Berlia

Other expenses.

So, in the other expenses segment, if I see, in the line item other expenses, I see a 190 bps drop on a sequential basis.

Rajeev Gupta

So I think, Rajiv, what you're referring to are really the common costs that get allocated across segments.

So, there was certainly a drop in terms of those common costs and largely, this is because we had strong collections in the quarter which led to lower provision for doubtful debts.

So that's what you see, Rajiv.

Rajiv Berlia

Okay.

And similarly, in the employee cost, I see a 180 bps kind of a drop.

And in the other expenses, I see 190 basis points of an increase.

So, I just wanted to understand.

So other expenses -- so it's just that there is an increase of 190 bps and employee cost, if I see, there is a drop of 180 bps? © L&T Technology Services Q4 FY23 Earnings Call April 26, 2023

Rajeev Gupta

So two things on this, Rajiv.

One, as far as the other expenses, this is to service some of the projects, we do increase third party contractors.

And also, you could have some software costs related to those projects, right?

That leads to the increase in other expenses.

As far as the employee cost, we continue to optimize on pyramid and a large part of that we've been able to achieve QoQ through induction of freshers and those freshers go through training and those freshers of course are then deployed onto projects, right?

That leads to the reduction on the employee benefits cost.

Moderator · Conference Operator

The next question is from the line of Abhishek Shindadkar from InCred Capital.

Please go ahead.

Abhishek Shindadkar

Hi, thanks for the opportunity.

I might want to revisit that employee benefit expense again.

So, if I reconcile the expense line item and the cost of sales in your presentation, it appears, which you also alluded, that there was a higher subcontractor expense.

So, could you just elaborate, one, was it for any particular vertical, if you can?

And the second is a broader question for Amit.

So historically, one of the key strengths of LTTS was to kind of mine accounts and transition them from the lower buckets to higher buckets.

If I see the recent presentation, it seems that we only have 1 $30M account versus 2 at the end of Q4 last year.

While the $20 million has seen an improvement.

It could also be that one has come off to the other bucket.

Any changes that we need to do in terms of sales, presales, mining, which can help us kind of go back to the 2 or 3-year-ago period where we had a couple of $30M plus accounts?

Thank you for taking my question.

Rajeev Gupta

Abhishek, let me address your first question.

And I already talked about the fact that, look, on employee cost, we continue to optimize pyramid.

And the other expenses, this is as a result of increase in third-party contractors and software costs related to projects.

We can certainly take this offline, Abhishek, so that we can provide more colour and details.

And to whoever else would like to understand, we can certainly talk about it offline.

With that, I'll hand it over to Amit to clarify on the top account.

Amit Chadha

Yes.

So Abhishek, thank you so much for asking that question.

Like I think Rajeev said in his commentary, I would like to confirm.

See, we don't look at -- and I've shared this with a lot of you earlier in the past that I don't look at trailing 12 months, I actually look at annualized run rate for the quarter and the past quarter to see as to where I'm heading with my accounts, right?

So I would like to confirm to you that we have one account that is now safely sitting above a $40M run rate, right?

We also have a couple of other -- so there's three other accounts that are clearly safely above the $30M run rate and then you see the accounts that are in $20–30M and then the $10–20M and the $5–10M.

So, I clearly see that.

If you wait for next quarter, you will start seeing some of that impact coming up in a positive way in the reporting as we do it.

And if you look at year-on-year, actually, as we have reported, you can see the $20M plus has gone from 6 to 9, $10M plus has gone from 22 to 24.

So there is a gradation improvement there.

We continue to focus on account mining.

We continue to focus on winning strategic new © L&T Technology Services Q4 FY23 Earnings Call April 26, 2023 accounts.

Clearly, the company is being run from a sales standpoint and account mining and account sales is two separate parts.

And next time when we meet, we will definitely have Alind meet you as well and spend more time on this subject.

Moderator · Conference Operator

The next question is from the line of Apurva Prasad from HDFC Securities.

Please go ahead.

Apurva Prasad

Thanks for taking my question.

So, Amit Sir, first question is on the $10M plus TCV wins, even from a full year point, it looks a lot lower versus where it was the previous year.

So, is it any part within the strategic bet or big spend areas as you highlighted earlier, which you don't see playing out as envisaged?

Amit Chadha

So, Apurva, thank you so much for that.

See, if you look at it, the last year, so if I compare FY22 to I compare FY23, I can confirm to you that the total TCV that the company has generated is at similar levels or slightly higher because, you know, the base is higher, so slightly higher than FY22. Having said that, you're absolutely right that the number of $10M plus, the double-digit deals, as we call them, is a tad bit lower.

Right.

So, I admit it.

But the number of $5M plus deals and the number of $2M plus deals that we have had, where there's a greater amount of ACV impact rather than TCV impact, have been higher for us.

And that's how we've chugged along, if you ask me, QoQ consistently at approximately 3%.

But for Q3, which was shall I say, it was a quarter that had the perfect storm of furloughs etc. that came together.

So I would not be worried.

We are currently going through the process of making sure that as we come back to you next quarter, we continue to give you the guidance.

But I can also tell you that some education has been needed on our part that $9M is not $10M and $8M is not $10M.

So we are working through that right now.

Apurva Prasad

Sure.

And I have another question for Rajeev.

Rajeev, this is on the segmental margin against Telecom and Hitech, which has historically always lagged.

So what would be your medium term view out here in terms of convergence closer to company average post-SWC integration?

And the second part is on your outlook for the overall DSO consolidated for next year and the OCF, which was at about ₹ 1300 crores or OCF to EBITDA, which is 76%.

How do you see that for next year?

Rajeev Gupta

So, Apurva, let me take the Telecom margins first and then I'll clarify the other questions.

On Telecom margin, we've been at that 12.4% range, around that mark.

Now, we may have clarified this in the past.

A lot of our investments are stacked in the Telecom segment.

The acquisition that we made of Orchestra Technologies, we still continue to record some costs on earnouts in this segment.

That should taper down in FY24, which will help the margins go up.

Having said that, with the SWC acquisition, we will likely see a reduction in margins.

And that's again more as an impact of consolidation than anything else.

We believe this is going to be a segment that will flow business into the other segments.

So you should take it to be where we do a lot of our investments in Telecom, which finally can evolve either in a Transportation segment or it could evolve in a Medical segment or for that matter, © L&T Technology Services Q4 FY23 Earnings Call April 26, 2023 Telecom itself, right?

It's likely that it will remain within this 10% plus range with SWC acquisition.

Second on the DSO – combined DSO – our aspiration for FY24 will be to come at a range of 115 – 125 days.

And we will continue to optimize like we've done in case of LTTS.

90 days combined, both billed and unbilled has been by far the lowest in the last few years, and we will look at optimizing for SWC as well.

So the range will be between 115 to 125 days.

Apurva, sorry, I lost your third question.

Could you repeat that, please?

Apurva Prasad

That was on the OCF, OCF for next year, that's all.

Rajeev Gupta

On the Free Cash Flows, like I said earlier, for FY23, we came in at 97% Free Cash Flow over PAT.

Our endeavor will be to continue to optimize.

We can come back to you on this.

We have still not modeled it.

But if I were to split between LTTS, I think our endeavor will be to continue to look at, right, above the 80% plus threshold in terms of FCF to PAT.

As far as SWC, with the improvement in DSO, we feel the FCF should improve.

But we will model this and come back to you in Q1.

Amit Chadha

I would like to just say one more thing.

We just want to be sure about this.

And we had mentioned this in January when we announced SWC acquisition as well and I think Rajeev alluded to it today as well.

So there is a team that's been put in place that's working full time on making sure that the processes of both SWC and LTTS are harmonized and brought together.

Plus, as we have shown you over the last three years, that we have consistently improved margins and DSO and free cash flow over the year.

And that same process is being implemented for SWC.

And we are very readily agreed to it.

And we are working together as one team.

So we do think that we will be in a much better position as we move forward.

Moderator · Conference Operator

Thank you.

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

Please go ahead.

Nitin Padmanabhan

Hi.

Good evening.

So, my question was around SWC.

I think you mentioned that when the Capex kind of revenue comes off, there will be continuity on the Opex kind of revenue.

Well, one would sort of imagine that this would mean that the revenue goes off for a bit, but margins do improve.

Could you shed a little light on that dynamic, please?

So that's the first one.

And the second one, in terms of the three, how do we think about the globalization of these contracts, internationalization rather?

So for that, typically, what would be the margins of the international contract versus the 8-10% kind of EBITDA that we have for SWC?

And typically, what would be the size of these contracts roughly, just so that we're able to sort of understand on an ongoing basis how this sort of evolves over a period?

Thank you.

Amit Chadha

Yes.

Hi.

Thank you so much, Nitin.

Good evening.

Number one, as Capex contracts, we look at very hard and seriously and only pick up ones that are adding value to our technology quotient and journey.

We are taking that all into account as we have given you the guidance for next year. © L&T Technology Services Q4 FY23 Earnings Call April 26, 2023 So we have taken all that, what will ramp down, what will ramp up.

We have done that math, and that's how we have provided the guidance, right?

Number one.

Number two is that the Opex spends that are there, those contracts are at our constant margins, so not to be worried.

Now, in terms of globalization.

I had written to about 100 customers I talked about last time, right after we did the acquisition, announced it.

I got a very positive response.

We actually have hired the entire team that we needed to augment and hire and we are averaging a good number of meetings on a weekly basis in terms of the interest areas, not just from Telecom Operators, M&E and Telecom Infra companies, but our traditional customers, because people are getting up and saying, we want to implement 5G, go after cybersecurity, etc. So we are definitely seeing that.

In fact, Eaton coming out and making an announcement that they work with us on SWC itself is an indication of that.

So therefore, I'm fairly comfortable in sharing that as we move forward in the quarter, you know, some of these guys are working on pure product development R&D.

They may not want us to do a share of our news article or whatever, but we'll do our best to share as much as we can.

But I do believe that there's a clear path, like Rajeev has defined a path on profits optimization, DSO optimization.

There's a clear path to taking it to the global world, a path that Alind is leading himself, along with the CBOs that we have hired in that area to take it forward.

The skills that they have got, so I shared this earlier, see about out of the 800 odd people that we have taken over from SWC – the family has come together, that's how we'll put it – about 600 odd people have got industry experience from the Hitech sector, and they were laterals that were admitted into the SWC family.

So, I do believe there's the right kind of talent that can work towards offshore contracts, etc. Now, what is the typical size of these contracts?

The typical size of these contracts for Telecom Infra & Operators will be in the same range as what we generate between, you know, that $5M to $15/20/25M.

If we're lucky, even signing a multi-year $50M contract, $40M contract.

So, right, right in that range.

Cyber security contracts will be slightly smaller.

They may be maybe in the range of ACV being between $2M to $6M, but then there's a lot more clients that will take advantage of that.

And therefore, the revenue can pick up very very quickly.

So, that's where we see that going in terms of things.

So, we're fairly comfortable with the trajectory of growth as we go forward.

Moderator · Conference Operator

Thank you.

The next question is from the line of Mihir from Carnelian Capital.

Please go ahead.

Mihir

Yes, hi, thanks for giving the opportunity and congratulations on the broad set of growth.

I think I largely wanted to understand on the offshoring side of things.

I mean, you made an initial comment that you are seeing more offshoring happening in the coming years.

So, if you can throw some examples, what is giving you the confidence that there is increasing offshoring happening?

So, that was my first question.

My second question was on the $40M contract that we have won.

So, if you could throw some more light as to what is this contract exactly and then what the ramp-up happens for this © L&T Technology Services Q4 FY23 Earnings Call April 26, 2023 particular contract.

And the third question was on the SWC.

Like, you know, when we see SWC, currently it's a full Government business which is there, having a DSO of more than 400 days and there could be some ramp-downs also.

So, just wanted to understand, you know, what could be the dropout rate from the current business which could be there from SWC given the fact that we are looking at some dropout happening when the renewables would come?

So, just wanted to have an understanding around that.

Amit Chadha

So Abhishek, you have to cover the offshoring, then I'll take the next one.

Abhishek Sinha

Yes.

So, on the offshoring front, like Rajeev had mentioned in his commentary, our mid-term aspiration is to go to about 60%.

We are currently at 57%.

Do we have the confidence?

We definitely are taking steps internally with our delivery leaders as well as sales leaders, putting more processes in place and engaging the customers to increase this.

We believe that this is definitely possible given where the world has moved from a hybrid perspective.

Amit, you're up.

Amit Chadha

Yes, sure.

So, in terms of, I'll address SWC and then I will go to the $40M contract.

So, the SWC, look, as far as we are concerned, SWC will bring in that additional above 10% that we are talking about for next year in terms of growth.

And we have taken into account all these contracts that are ending, new contracts that are starting, etc. And we have done the entire math and algorithm on that one and we are fairly comfortable with SWC bringing in right, profitable growth, sustainable growth to us.

I mean, that's our mantra.

Now, in terms of $40M contract, this is over 5 years like we have announced and actually is to help product development and enhancement of this Transportation major that we have signed.

And this, we believe, will be a long-term relationship for us as we go on.

It is a new customer that has been added to LTTS.

And the exciting part is there is work on autonomous, there is work on electrification, there is work to be done on AI.

In fact, there is a certain part of working on large language models.

And I believe that this truly has much more potential than the $40M that we have announced.

Again, you have known us for a long time.

We want to be able to commit what we can deliver and deliver what we commit.

So that's why we have gone with this $40M number.

Otherwise, the potential is a lot higher in this space.

I would also like to confirm that this deal is already in execution as of Q1 with billing happening for the company.

So that's where that is.

Thank you so much.

Rajeev Gupta

I just want to add one point to address the DSO in SWC.

Like I mentioned, we are running a synergy track, right?

And DSO and Working Capital is one of the streams.

So at least I wanted to convey to everyone, we are mindful of the DSO of the current business.

We already have identified areas, both from a process improvement standpoint and second from a mix of deals that have been either catered to within SWC or that likely will win in the near future to be able to see that DSO coming down.

So hopefully that should help you understand how we will address the DSO of this business going forward. © L&T Technology Services Q4 FY23 Earnings Call April 26, 2023

Mihir

Sure.

Just one last clarification.

I mean, you know, if you can talk about like what is the revenue dropout rate that you are considering for next year from SWC?

Rajeev Gupta

So to give more color to what Amit talked about, all of this has been factored in the 20% plus guidance that we provided.

Amit mentioned about 10% plus coming from organic and the remaining coming from SWC.

All of this has been factored.

So again, would like to give the assurance that beyond this, we do not see anything that is going to be detrimental to the business that we have acquired.

Moderator · Conference Operator

Ladies and gentlemen, we will take that as a last question.

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

Thank you and over to you, sir.

Pinku Pappan

Thank you everyone for being with us on this call today.

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

If there are follow-ups, happy to engage with you through the course of this quarter.

With that, on behalf of the entire management team here at LTTS, we would like to wish you a very good day and hope to see you soon.

Thank you so much.

Bye-bye.

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, on behalf of L&T Technology Services Limited, that concludes this conference.

Thank you for joining us and you may now disconnect your lines.

Note

This transcript has been lightly edited for clarity and accuracy.