L&T Bets big On IT To Expand Services Business Revenue Share

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New Delhi: Betting big on IT and engineering technology services, diversified conglomerate L&T aims to expand revenue share of services businesses to 15 per cent, while bringing down the projects portfolio to 70 per cent.

This would include 10 per cent from the IT and technology services alone in the group’s total turnover, while their share in the profits could be even higher at 25 per cent, Larsen and Toubro’s Group Executive Chairman A M Naik said.

Founded in 1938, L&T has as many as 82 businesses, many of which have been set up under Naik’s leadership, and has emerged as one of the top conglomerates of the country with over USD 15 billion turnover.

However, engineering, construction and infrastructure have been among its main businesses in the past.

The two separate companies for the IT and technology services together are estimated to clock a turnover of $1.5 billion this year, Mr Naik said.

Mr Naik, who has been with L&T for nearly 52 years including 18 years as its chief, said the group is targetting to grow faster in the IT and technology services segments, with one of the key reasons being that these businesses can provide “a huge cushion against our exposure to the projects business”.

“I want to take the services business to 15 per cent, from 10 per cent currently, and bring down the project business to 70 per cent,” Mr Naik told PTI in an interview.

“The most ideal that we could achieve over the five years is where the project business does not go beyond 65 per cent.

Manufacturing and services together between 16-17 per cent each, will make sure that the balancing of our portfolio is done well,” he added.

Asked about the revenue target of technology and IT itself, he said it could be around 10 per cent.

“So, let’s say if we are $30 billion, they will be $3 billion,” Mr Naik said, while adding that their share in profit could be even higher at 25 per cent.

L&T Infotech, the country’s sixth largest IT services firm with a revenue of $887 million and staff-count of over 20,000 people, is scheduled to hit the capital market with an estimated Rs 1,200 crore IPO on Monday.

The parent L&T is already listed with a market cap of nearly Rs 1.5 trillion, while L&T Finance Holdings got listed over five years ago and commands a market cap of about Rs 14,000 crore.

At Rs 705-710 per share price band for L&T Infotech IPO, it will fetch a market cap of over Rs 12,000 crore.

Mr Naik said L&T group has three major sectors, the first being “very high-tech manufacturing like nuclear reactors, aerospace and defence” that accounts for 15 per cent revenue.

However, the business accounting for 74-75 per cent is “very highly risky”, he said, referring to the second major sector of project business.