L&T Tech eyes 'big boys' club with the SWC buy
With its biggest acquisition since its inception, L&T Technology Services set for a leapfrog jump in network engineering segment
Bengaluru: L&T Technology Services is confident of entering the 'big boys' club in terms of revenue from engineering services and related segments in coming years post its acquisition of Smart World & Communication (SWC) business from the parent company, L&T.
In an interaction with Bizz Buzz, Amit Chadha, MD &CEO, LTTS said the acquisition is both margin and EPS (earnings per share) accretive and will help the engineering services firm achieve $1.5 billion revenue by FY25.
"If you look at large IT firms such as TCS, Infosys, Tech Mahindra and Wipro, they do $300 million to $500 million of business annually in network engineering segment. With this acquisition, we have the opportunity to enter into big boys' club as SWC comes up with deep expertise and assets in the said segment," Chadha said.
L&T Technology Services (LTTS) entered into an agreement to acquire SWC, which is a connected intelligence solution provider with presence in communications, safe and smart solutions and cybersecurity, from parent L&T in a Rs800-crore deal last week. Post announcement, stock prices of LTTS have seen a sharp drop after stabilising on Monday as some brokerage firms have highlighted the challenges to near-term growth prospects owing to integration of SWC. This is the biggest acquisition of LTTS since its inception.
However, the company said there are no challenges in the integration process and the company will be able to accelerate its revenue growth in coming years.
"From margin perspective, we were running at 14 per cent (when I took over) and in one year, we have gone up to more than 18 per cent. We have a playbook on operations (for SWC) and as we turn around to draw more revenue from international clients, we are absolutely confident that we will back in 18 per cent EBIT margin band in next 12-18 months (by FY25). It may happen sooner. Therefore, this acquisition is both margin accretive, EPS accretive and a growth business for us," Chadha said.
As part of the acquisition, around 700 technology professionals will be part of LTTS now, which will propel the company to enter many key areas along with better delivery of existing services. Areas like electrification, 5G, sustainability, cybersecurity and others will get a fillip post SWC acquisition.
"Integration will be swift.We have the management bandwidth today to absorb upto a half a billion dollar of revenue (without hiring senior leaders). Also, Smart World itself comes with senior leaders of the industry. So, we will remain focussed. Also, the market should be happy that we are buying a company with same core value, same technology DNA and therefore, we will grow together," Chadha said.
The L&T Group company is eyeing to draw 65 per cent of SWC' revenues from international operations from current 35 per cent in coming years.