L&T Tech, Zensar express caution after Sep quarter | Mint
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Business News/ Companies / News/  L&T Tech, Zensar express caution after Sep quarter
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L&T Tech, Zensar express caution after Sep quarter

The overall performance of midcap IT services segment primarily mimics the cautious approach set out by the three largest Indian IT services providers

Profit after tax of LTTS increased 1.4% sequentially to ₹315.4 crore, while headcount rose by 488 to 23,880.Premium
Profit after tax of LTTS increased 1.4% sequentially to 315.4 crore, while headcount rose by 488 to 23,880.

NEW DELHI : India’s mid-cap information technology services firms Larsen & Toubro Technology Services and Zensar Technologies expressed caution in their September quarter earnings on Tuesday. While L&T Tech recorded 3.2% sequential revenue growth to $288.1 million in constant currency term, Zensar’s revenue was up 0.2% sequentially to $150.2 million.

Despite growing revenues, LTTS slashed its FY24 revenue guidance by 2.5 percentage points to 17.5-18.5%, from 20% in April. All the companies expressed caution, and a conservative outlook for the rest of the fiscal year.

“While longer-term trends for engineering, research and development remain strong, in the short term we are seeing long decision cycles and incremental headwinds from macro-economic stress in various geographies. We revise our dollar revenue growth guidance for FY24 to 17.5%- 18.5% in constant currency," Amit Chadha, managing director and chief executive of LTTS, said in a press statement.

LTTS posted 10bps decline in operating margin to 17.1%. Profit after tax increased 1.4% sequentially to 315.4 crore, while headcount rose by 488 to 23,880. Attrition dropped 2.1 percentage points to 16.7%.

One basis point (bps) is one-hundredth of one percentage point. LTTS only reports revenue in dollar terms.

Zensar reported a 70bps rise in operating margin to 23.5%, while PAT rose 10.6% sequentially to $21 million. Net headcount declined marginally to 10,330, while attrition saw a 2.8 percentage points drop to 13.1% in September quarter.

The overall performance of midcap IT services segment primarily mimics the cautious approach set out by the three largest Indian IT services providers—TCS, Infosys and HCL Technologies, which reported their earnings last week.

TCS does not offer guidance, but posted 0.3% sequential fall in its dollar revenue to $7.21 billion. Its shares fell nearly 3% on the BSE following the announcement of its September quarter earnings, despite its 17,000 crore share buyback plan at 4,150 apiece.

Infosys cut its FY24 revenue growth guidance by a further one percentage point to 1-2.5% now, while HCL Technologies reduced its guidance down to 5-6% for FY24, down by 2 percentage points.

Manish Tandon, managing director and chief executive of Zensar, also expressed similar caution. “It’s a tough market out there… Discretionary spends have declined significantly. During the pandemic, and when the (US Federal Reserve) interest rates were close to 0%, the propensity to take up high-risk digital projects were very high, which was benefitting us. Decision cycles are taking longer, and budgets are constrained everywhere we go. We’re already seeing companies continuing to declare retrenchment—as a result, the cautionary approach is not just about billing large deals, or staffing," he said.

“Things will remain cautious—I haven’t seen anything in the market that points to a massive turnaround. Until the interest rates in the US and elsewhere remain elevated, and quantitative tightening continues, it will be difficult for the industry," Tandon added.

Shares of LTTS closed at 4,615.45 on BSE on Tuesday, down 1.57% through the day. Zensar closed at 549.70, up 0.67%.

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ABOUT THE AUTHOR
Shouvik Das
Shouvik Das is a science, space and technology reporter for Mint and TechCircle. In his previous stints, he worked at publications such as CNN-News18 and Outlook Business. He has also reported on consumer technology and the automobile sector.
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Published: 17 Oct 2023, 11:00 PM IST
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