High onsite attrition led to a supply gap in Q4FY22, although demand continues to remain robust for LTI | Q4FY22 Conference Call Highlights3 min read
- Q4FY22: In US Dollars: Revenue at USD 570.4 million; growth of 3.1% QoQ and 27.5% YoY. Constant Currency Revenue growth of 3.6% QoQ and 29.0% YoY. In Indian Rupees: Revenue at INR 4,302 Cr; growth at 4.0% QoQ and 31.6% YoY. Net Income at INR 638 Cr; growth of 4.1% QoQ and 16.8% YoY.
- FY22: In US Dollars: Revenue at USD 2,102.5 million; growth of 25.9% YoY. Constant Currency Revenue growth of 25.8% YoY. In Indian Rupees: Revenue at INR 15,669 Cr; growth at 26.7% YoY. Net Income at INR 2,299 Cr; Net Income growth at 18.6% YoY.
- EBIT margin declined 60 bps QoQ on lower working days and business mix shift. (Sales, general and administration) SG&A declined 60 bps QoQ to a low of 10.3%. Cost to backfill attrition was managed through SG&A leverage.
- Verticals: Revenue mix in Q4FY22 consists of Banking and Financial Services (32.7%), Insurance (13.4%), Manufacturing (17%), Energy and Utilities (8.8%), CPG, Retail and Pharma (10.3%), Hi-tech, Media & Entertainment (11.7%), Others (6.3%).Growth in verticals on YoY basis: Banking and Financial Services (35.5%), Insurance (17.6%), Manufacturing (26.5%), Energy and Utilities (23%), CPG, Retail and Pharma (21.9%), Hi-tech, Media & Entertainment (27.1%), Others (30.6%).
- Geography: Revenue mix in Q4FY22 consists of North America (65.6%), Europe (16.2%), Rest of world (8.3%), India (9.9%). All the geographies have grown at nearly 25% on YoY basis except India which has grown by 42%.
- Onsite supply gap hurts volume growth. High onsite attrition led to supply gap resulting in non-fulfillment of demand, leading to flat volumes on a sequential basis. Onsite volume growth could have been in the 2-4% range in case supply challenges were met.
- SG&A costs will increase as a % of revenue. LTI will increase sales and marketing costs. LTI will ramp up hiring of sales team. Endeavour will be to reduce G&A costs.
- Capex spending will remain high in FY2023 to make up for weak Capex in FY2021. LTI is investing in locations such as Coimbatore and Kolkata to cater to employee preferences.
- Human resource: Hired 5200 freshers in FY22 and planning to hire 6500+ freshers in FY23. The majority of salary hikes were done on April 1; hence margins will be affected in the next quarter. + Net headcount addition of 2,448 |Workforce strength: from 44,200 in last quarter to 46,648 in Q4FY22. LTM (Last twelve months) Attrition rate increased from 22.5% in Q3FY22 to (~25%) in Q4FY22. Attrition declined 200 bps in 4QFY22 qoq. The decline in attrition was sharper offshore. Onsite attrition continues to remain high and will be addressed. Attrition rates will decline after a few quarters.
- +486 Clients including 70+ Fortune 500 companies in 31+ countries
- Capital Return: Final Dividend of INR 30 per share; Dividend payout ratio of 41.9% for the year.
- ROE of 28.5% for the year
- Total contract value (TCV): In Q4 FY22, won 4 large deals with net new TCV of over USD 80 million. Large deals are positive and provide visibility to growth, especially in an environment where headwinds could emanate from a deteriorating macro. The deal pipeline is reasonably good with 50% of the pipeline in the late stage and four large deals in the contracting phase. The deal pipeline continues to be robust, and the company remains confident of maintaining industry-leading growth in the coming year as well.
- FY23 Guidance: PAT Margins (14-15%) in FY23.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell stocks or MF.