Debasis Mohapatra
Bengaluru, 3 November 2024
Engineering services firm, L&T Technology Services (LTTS) expects its operating margin to be better in the second half of the current financial year as compared to the first half.
For the quarter ended September, the company reported an EBIT margin of 15.1%, which was a tad lower than the previous quarter.
According to the L&T Group company, increased investments in the first half led to marginal dip in the operating margin during H1.
“We have prioritized investments in H1 FY25 to accelerate growth, build leadership and technology solutions ahead of the curve. We expect this will lead to a step up in revenue growth and better quality of revenues, providing us with a path of $2 billion revenue aspiration and EBIT margin of 17-18% range in the medium term,” Chief Financial Officer of LTTS, Rajeev Gupta has said during the analyst call.
“For FY25, we reaffirm our revenue guidance of 8-10% and expect H2 EBIT margin to be better than H1 and continue to aspire for a 16% EBIT level for the year,” he added.
The ER&D firm also informed that there would be wage hikes in the October-December quarter. Despite the wage hike, the firm would be able to absorb its impact and maintain the margin level.
“We plan them (the wage hike) to be in Q3 and will be effective from November onwards. So, we will see likely two months of impact in Q3 for increments. We should likely see in a full quarter an impact of close to about 100 basis points to 125 basis points on account of increments. The fact that this is two months in a quarter, it will be lower impact to start off with, but conscious of the fact, we aspire for 16% EBIT levels, and we’ll be able to absorb this increment in Q3 as well,” Gupta said.
LTTS’ share price lost 3.34% last week (November 1) to close at Rs 4,950 in NSE.
