Do you think L&T Infotech is a good bet after the latest results for Dec-20 quarter?

The information technology subsidiary of the L&T group, L&T Infotech, reported Q3 PAT growth of 37.9% yoy at Rs.519 crore. This came on the back of revenue boost. In fact, L&T Infotech had reported 12.16% growth in Dec-20 quarter revenues at Rs.3,153 crore on a consolidated basis. In fact, L&T reported growth across its major vertical lines including BFSI and manufacturing.

However, the good news is that the de-risking is visible with US revenues dipping marginally. That has also helped profits. For the Dec-20 quarter, consolidated operating profits were up 42.34% at Rs.650 crore. Like most of the IT companies that have been hit by higher manpower costs, L&T Infotech also saw lower cost structure due to the cost control measures initiated.

This resulted in the operating margin or OPM improving from 16.25% in the Dec-19 quarter to 20.62% in Dec-20 quarter, a substantial growth of 437 basis points. In fact, the Profit after tax or PAT for Dec-20 quarter was up 37.86% at Rs.519 crore. This performance was supported by an improvement in operational performance, despite a higher tax outflow. PAT margins expanded by 307 basis points from 13.40% in Dec-19 to 16.47% in Dec-20.

During the quarter, L&T Infotech reported growth in its major BFSI, manufacturing and retail operations. However, it took a hit on revenues from energy and media largely due to the pandemic and the global slowdown. Even if you look at it in dollar terms, L&T Infotech reported 5.8% growth in revenues on sequential basis i.e. mom. The net profits in dollar terms were up 38% on a yoy basis, which is the icing on the cake.

In terms of business mix in the latest quarter ended Dec-20, BFSI accounted for 45% of revenues and manufacturing services accounted for 17%. The remaining Energy, retail and media accounted for 10% each as a share of revenues. Interestingly, in line with other IT players, the share of digital revenues moved up from 41.4% to 44% in the Dec-20 quarter you.