L&T Technology Services "Engineering for Scale" Annual report Synopsis FY21

Introduction

The rapidly evolving trends in the global economy require technology companies to have a wide range of products and services with the ability to scale up in an agile manner. L&T Technology Services (LTTS) is part of the vanguard in this era, with demonstrated prowess in five key verticals — Transportation, Telecom and Hi-Tech, Industrial Products, Plant Engineering and Medical Devices.

LTTS’ expertise in providing integrated services in engineering and technology has helped its customers implement their digital transformation roadmaps in a world that has been forced to transform rapidly with a growing reliance on new-age software-driven technologies.

Working with 69 Fortune 500 companies and 53 of the world’s top ER&D companies, LTTS is contributing significantly to trends such as mobility, digital front door and smart machines to maximize productivity and minimize potential errors. LTTS’ deep engineering heritage derived from the L&T DNA is helping shape the future of engineering services.

Transportation

LTTS’ transportation engineering services are enabling OEMs across the globe to achieve faster time to market using digital technologies and is helping them to build innovative next-generation vehicles and aircrafts. LTTS offers the complete gamut of engineering services and solutions for its global customers in the transportation industry, including OEMs and Tier 1 suppliers in the Automotive, Trucks & Off-Highway Vehicles and Aerospace sectors.

In the Automotive sector, LTTS helps its customers through best-in-class platforms and solutions in rapidly emerging areas such as Electrical Vehicles (EV) technologies, Advanced Driver Assistance System (ADAS) and Autonomous Drive (AD). LTTS’ global expertise also spans Telematics and connectivity, Infotainment Powertrain and end-to-end design & development of automotive components.

LTTS has over a decade of domain expertise in the Trucks and Off-highway segment, and offers services across industries like Construction & Mining, Cranes & Material Handlers, Commercial Vehicles, Agricultural & Gardening Equipment, Powersports and Polymer.

In the Aerospace sector, LTTS’ offerings encompass a wide spectrum, including aero engine, aero structure & systems, avionics, air traffic management and new age disruptive digital transformation solutions, which cater to all phases of the Aircraft Lifecycle – design, manufacturing, and aftermarket services. The Company’s engineering and digital solutions help Aerospace OEMs and Tier 1’s maximize ROI, meet compliance standards, increase quality and stay competitive in an ever-changing Aerospace sector.

Technology Trend

Electric Vehicle
Advance Driver Assistance system
Autonomous Drive

Technology Investment

EV Lab in Bengaluru
Dublin Design Center for automotive product design and solutions
Rockford Design Center for the Aerospace industry
Munich Center of Excellence for automotive hardware development

Customer Success

For a leading European automotive customer, LTTS is setting up a telematics lab for next generation automotive vehicles
LTTS is building a real-time technology framework for a European automotive components manufacturer to simulate controller design of its e-Powertrain system.

Telecom & Hi-Tech

In the Telecom and Hi-Tech vertical, LTTS offers engineering services and solutions for five key segments: Telecom, Consumer Electronics, Semiconductor, ISV and Media & Entertainment.

Being a leader in this space, LTTS helps its customers engineer value across the product lifecycle: from design conceptualization to the deployment of products and services. LTTS’ team of experts work across the value chain to provide digital services and solutions for Communications Service Providers, Networking and Technology System Operators, OEMs and Chipset Makers.

For the Semiconductors industry, the Company’s futuristic solutions and IC designs offer cutting edge VLSI IP for camera, storage, display and interface solutions and also provides hardware system design, platform software, modem services, verification & validation, multimedia, connectivity, storage, mechanical engineering, and customer engineering support.

For the Consumer Electronics segment, LTTS provides services in the areas of product conceptualization, design & development, platform software, testing & certification, manufacturing support, product maintenance, and product launch support.

For the Media & Entertainment industry, LTTS provides services in product engineering, product conceptualization, design & development, testing & certification, manufacturing support, product maintenance, and value engineering. And in ISV, LTTS undertakes application engineering, VLSI, Cloud engineering, product uplift, platform development & migration, product support, testing and certification

Technology Trend

Voice-as-a-service
5G
DevOps
ASIC Design
VLSI IP
Cloud Engineering
OTT

Technology Investment

Santa Clara ASIC Design House
RF Lab, 5G and Telco Cloud Engineering Lab
Security Centre of Excellence for Telecom and Hi-Tech, Jerusalem
Voice-as-a-Service Integration Lab

Customer Success

Technology and innovation partner for a global telecommunications firm covering 5G and end-to-end engineering services
Dedicated engineering analytics lab to support a global client’s new line of server platforms

Industrial Product

LTTS supports its global customers across industries such as Building Automation, Power & Utilities, Machinery and Test & Measurement through services in the areas of product, digital and value engineering. The Industrial and Consumer Products practice in LTTS spans the entire value chain from design, development and deployment to monitoring, testing and automation of processes, products and solutions. Our engineers work on product development, customization and product ruggedization, mobility enhancement for cloud services, IoT device integration, enterprise applications and DevOps.

LTTS supports global customers across building automation, home and office products, energy, process control and machinery with its deep domain expertise across software, electronics, connectivity, mechanical engineering, industrial networking protocols, User Interface/User Experience (UI/UX), test frameworks and enterprise control solutions. LTTS is working with customers in this space on important initiatives like Energy Sustainability to help them achieve net carbon zero status; Supply Chain optimization and standardization as customers look for alternate sourcing; and Digital Manufacturing to manufacture products in a smarter way. LTTS’ team of experts works across segments to help OEMs as well as operators drive innovation and efficiency. The Industrial Products practice spans the entire value chain from design, development, and deployment to monitoring, testing, and automation of processes, products, and solutions.

Technology Trend

Digital Twin
Sustainability
Product Ruggedization
Smart Campus

Technology Investment

Peoria Center of Excellence in industrial products design
Think Studio for new product design and development
Power Electronics Design and Equipment Testing Lab
Digital PLM Design Center

Customer Success

Key partner for driving digitalization initiatives for a Swiss elevator and walkway manufacturer
Established a dedicated Global Engineering Hub to power a leading wind turbine manufacturer’s worldwide product roadmap

Plant Engineering

With its world-class expertise in engineering, procurement and construction management, LTTS is involved in every phase of a manufacturer’s plant lifecycle – from conceptualization to commissioning. LTTS takes a consulting-led approach to offer state-of-the-art digital solutions that help customers upgrade/integrate their legacy systems to smart platforms for better synergy.

LTTS has created a strong market differentiation with its solutions for efficient, safe and sustainable production facilities, helping clients improve plant productivity. The Plant Engineering business vertical caters to diverse industries, including Consumer Packaged Goods, Chemicals and Energy & Utilities.

Plant Engineering is a very differentiated practice at L&T Technology Services with a business objective to provide high end engineering services that enable manufacturers to efficiently run projects and plants. LTTS has created a strong market differentiation with its offerings on efficient, safe, and sustainable production facilities for clients to improve their plant productivity, efficiency and safety. Through these offerings the Plant Engineering practice caters to diverse industries, from Owner Operators to EPC Companies and Original Equipment Package Suppliers in the domains such as Consumer Packaged Goods, Chemicals, and Energy & Utilities.

LTTS provides end-to-end solutions in the areas of design, engineering, project management, and handover operation and maintenance and offers custom digital solutions over the plant lifecycle. As an engineering, procurement, and construction management (EPCM) services specialist, LTTS supports every phase of a plant’s lifecycle from concept to commissioning. The Company enables its customers to address all their engineering requirements to streamline their processes, resolve downtime issues, and adhere to statutory, human safety, machine safety, regulatory compliance as well as local and global standards. The Company’s consulting led approach and digital solutions enable manufacturers to upgrade/integrate their legacy systems to smart platforms that drive connectivity and synergy.

Technology Trend

Digital Engineering
Contactless Manufacturing
Laser Scanning
Low-cost Automation

Technology Investment

High-Value Engineering Center
AR/VR Innovation Hub
Integrated 3D Plant Digitization CoE
Smart Manufacturing Lab

Customer Success

Digital twin modelling for a chemicals and plastics major across 20+ sites in North America
3D modelling and digital twin services for a global oil and gas company across its worldwide asset portfolio

Medical Devices

In this fast-growing business vertical, LTTS helps medical OEMs speed up product development cycles and shorten the time-to-market. The Company works with global names in medical devices and healthcare to devise solutions around remote medical care, in-vitro diagnostics, patient mobility services, home healthcare and medical Internet of Things (MIoT).

The Company works with global medical devices and healthcare companies to offer solutions around remote medical care, regulatory compliances and approvals, in-vitro diagnostics, patient mobility services, surgical services, home healthcare and medical Internet of Things. LTTS also provides pre-compliance testing and validation support, including product/compliance remediation, compliance management, and regulatory documentation support.

LTTS has designed, developed and helped manufacture 200,000+ medical devices for global enterprises which are sold across 3 continents.

Technology Trend

Telehealth
Digital Front Door
Servitization
In-Vitro Diagnostics
MIoT

Technology Investment

Microscopy Lab
Imaging Lab
Security Centre of Excellence for Medical Devices Industry, Jerusalem
R&D for Endo-trainer Kit and Chest rAI (Trademark)

Customer Success

Design, development and global launch of a new blood cell counter for a leading medical electronics equipment manufacturer
Product design enhancement and support for a major medical device manufacturer’s surgeon console and robotic arm subsystems

From the Desk of Founder's Chairman

Engineering for Scale: The 2021 Perspective

As we prepare to mark the fifth year of the Company’s listing, I am happy that LTTS has built further on its core engineering legacy drawn from parent company Larsen & Toubro. Led by the twin engines of sustained R&D focus and a culture that encourages innovative and out-of-the-box thinking, your Company now offers a wide canvas of engineering solutions and offerings.

Your Company also continues to expand its footprint in emerging future-facing technologies, such as Voice-as-a-Service. In this segment, LTTS has partnered with Amazon to support voice integration for the Alexa ecosystem spanning different domains and industries.

While some concerns may continue to persist on the scale and speed of the economic recovery, the continued market confidence in India’s ER&D sector underscores its ability to leverage global opportunities.

It is becoming clear that the future will see a proliferation of digital tools and practices. This opens a large canvas of opportunity for leading engineering services providers like LTTS. The ability to leverage digital engineering services and solutions will play a part in stimulating recovery and driving growth in a post-pandemic world.

According to analyst projections, the global ER&D market is expected to grow to $1.9 trillion in the next three years from the current ~$1.4 trillion on the back of R&D investment by global organizations and the increasing sophistication of the ER&D services industry.

Your Company is India’s largest independent engineering services company, and is widely acknowledged to be an industry bellwether. We are well positioned to capitalize on the emerging opportunities in the space.

LTTS is also consciously building on its rich and diverse engineering base. The Company has one of the most diverse set of digital offerings for customers across industries such as its smart campus framework i-BEMSTM, its predictive maintenance platform Avertle and AI-based Chest rAITM analysis system to assist radiologists. Such end-to-end platforms and solutions enable global enterprises achieve faster time to-market using accelerators such as machine learning and engineering analytics and also help them move beyond the pilot stage to the entire offerings lifecycle

Your Company was awarded the Frost & Sullivan 2020 Global Customer Value Leadership Award for i-BEMSTM and has been recognized as a ‘Leader’ in Industry 4.0 for Development and Verification & Validation Services by the Everest Group. Zinnov Zones rated LTTS as a Leader across Digital Engineering, IoT, AI and Digital Thread, and also named LTTS in the Leadership Zone across six major verticals for the fourth consecutive year. These accolades reaffirm the depth of vision and focus of LTTS and its management team.

From CEO's Desk

We have been working aggressively to minimize disruptions to our business and proactively communicated our business continuity plans to customers, who have been appreciative of our measures. During the initial phase of the pandemic, our engineers created digital clones of our R&D labs that cater to customers in North America and Europe. By virtualizing our labs, we provided an interactive and intuitive 360-degree virtual platform of our India-based design labs for customers. Complete with simulations, tutorials and demos, the platform allows clients to view and virtually experience our innovations at the click of a button. At the same time, we inaugurated new labs such as the Electric Vehicles testing lab in our Bengaluru campus, dedicated to helping customers across the globe evaluate and verify the performance, endurance and functional testing of EVs.

Undeterred by the myriad disruptions, our engineers continued to file patents in FY21, with the technology patents portfolio crossing the 650 mark. Over the past several months, patents have been filed in exciting new domains including applications related to AI, predictive analytics, digital image processing and marine technology.

Partnered with end-customers to address several near-term business challenges around supply chain, reprioritizing product lines and inventory management. Using F.R.U.G.A.L. Manufacturing principles, LTTS’ engineers have been helping customers build multiple what-if simulation models to analyze optimum staffing, inventory, warehousing and throughput – keeping in view social distancing, disrupted supply chain and the lack of skilled manpower in a shop floor or warehouse.

LTTS won significant deals even after the pandemic started spreading, reflecting the inherent soundness of our business model. During the financial year, LTTS won its largest ever $100 million plus deal from an Oil & Gas major, a true testament to our unmatched expertise in the plant engineering space.

LTTS’ acquisition of Texas-based Orchestra Technologies last year has allowed us to capture the opportunities in 5G with Telecom service providers and Network OEMs, as they ramp up 5G rollouts and look for solutions to manage and optimize networks.

LTTS has established itself as the largest pure-play engineering services company out of India, with a leadership position that cuts across major industries. And as we continue on this path, we now aspire to become the world leader in Engineering & Technology Services.

Our verticals and horizontals have a clear mandate to improve LTTS’ technology quotient and build reusable assets that can be our differentiator in the marketplace. To stay relevant in the marketplace for the coming years, we have identified 6 strategic investment areas including EACV, 5G, Medtech, Digital Manufacturing, AI&ML driven smart offerings and Sustainability which will help us to scale and enable our engineers to stay ahead of the curve: These six technology areas will become the building blocks to support the domains that our engineers are working in and will help take our projects to the next level, benefiting customers.

As an organization, it is clear to us that we need to do capillary force building from within by creating a channel of opportunities for employees. Training and mentoring platforms incubated within LTTS (such as Leader’s League, CEO Club and TechExpression®) offer a level playing field for high potential employees irrespective or rank, gender or hierarchy. Our growth as an organization is mutually tied to the growth of our employees and the leadership team is committed to investing in their career evolution.

We also saw an encouraging response to TECHgium®, LTTS’ unique industry-academia initiative where engineering students across India work on challenges shared by LTTS’ global customers cutting across new-age technologies. For the first time held under the virtual mode, the fourth edition of TECHgium® saw record-breaking participation thereby placing our forum as one of the most sought-after by engineering students in India to gain exposure to solving real-life business challenges.

AGILITY - The name of the game

The global industrial scenario is evolving rapidly, and the only way to ensure sustainable growth is through identifying key technology trends well in advance and setting the pace for their subsequent adoption. Reaffirming its commitment towards helping global customers become more nimble in this dynamic scenario, LTTS has identified six strategic areas to drive business agility. These include:

1. Electric Autonomous Connected Vehicles (EACV)

2. 5G

3. Medtech

4. Digital Manufacturing

5. AI & ML driven smart offering

6. Sustainability

ADABPTABILITY - The soul

The global pandemic helped highlight the reactive nature of business processes and operations, compelling organizations worldwide to adopt new technology-driven measures for ensuring business continuity. The lesson was clear – the more dynamic we are in our approach to industry needs and the faster we adapt to the changes around us, the more successful we become.

Adapting to the new normal, LTTS undertook several key investments to future-proof its workforce and help them thrive and prosper. The Company also undertook an internal realignment of resources to ensure uninterrupted service delivery. This included the setting up of Home Labs, implementing Work from Anywhere (WFX), providing WFX OmniOpus(TM) certification for remote program management and launching Engineering-as-a-Service to ensure near-zero resource wastage.

The Company unveiled F.R.U.G.A.L Manufacturing, a comprehensive digital framework addressing social distancing and business continuity challenges. It also launched Labs-as-a-Service for quicker testing and validation and introduced Virtual New Product Development Services for expedited product launches.

Innovative Engine - LTTS has added 18 labs this year, including the EV lab, the Sensor lab, the 5G lab and the Voice-as-a-Service lab. Further, LTTS has leveraged virtualization in a big way, setting up several digital clones of existing labs, enabling customers to visit them virtually for an immersive experience. LTTS’ Electrical Vehicle lab in Bengaluru was inaugurated virtually during the height of the pandemic, setting the tone for the rising trend.

Alliance

1. Selected by Airbus to provide technology and digital engineering solutions for Airbus’ Skywise platform as part of the ‘Skywise Partner Programme’. With more than 130 airlines around the world already connected to Skywise, the platform is playing a vital role in enabling and accelerating digital transformation of the aviation sector.

2. Amazon has selected LTTS as its engineering partner to support Amazon Alexa Voice Service (AVS) integration across various connected devices spanning multiple domains and industries.

3. LTTS expanded its collaboration with Microsoft Corporation and launched its latest and enhanced version of the i-BEMS™ platform on Microsoft Azure to transform buildings into future-ready smart campuses.

4. LTTS expanded its collaboration with Microsoft Corporation and launched its latest and enhanced version of the i-BEMS™ platform on Microsoft Azure to transform buildings into future-ready smart campuses.

5. Partnered with Aspen Technology, a leader in asset optimization software, for delivering enhanced cloud hosting and virtualization services globally.

SCALABILITY - The goal

With the rise in technology adoption, enterprises need partners with multi-dimensional skills both in the legacy and the digital space. LTTS provides a unique blend of multi-vertical expertise, a traditional engineering DNA and an unmatched digital prowess – which translates into winning and delivering large transformative deals for its clients.

Building on the Digital Advisory Practice (DAP), LTTS has aligned its sales, delivery and operations strategically to pitch for deals across industries. These engagements are diverse in terms of technology scope, domain expertise, nature of engagement, delivery approaches, methodologies and scale.

The core objective of DAP was to go beyond selling solutions and services and helping companies to architect and execute their digital roadmap with LTTS as a consulting partner. LTTS has successfully incorporated DAP principles in effective functioning of its two horizontals: Digital Manufacturing Services (DMS) and Digital Products and Services (DPS).

DMS focuses on providing digital solutions for remote manufacturing and digitalization of the entire shop floor to increase automation and reduce manual intervention. DPS concentrates on successfully deploying AI/ML and other emerging technologies to create intelligent products and services for global enterprises.

In addition, support for next-gen transportation with cutting-edge Battery Management Systems for electric vehicles and AI/ML in consumer devices for a transformed user experience are some other key areas which are in focus.

Leveraging the three key strengths of agility, adaptability and scalability, LTTS has continued to make its mark across industries at a global level.

1. $100+ million deal win in the Oil & Gas Sector: LTTS has secured a milestone deal valued at over $100 million from a global Oil & Gas major. The Company’s mandate is to support two of the customer’s integrated refining, chemicals and polymer manufacturing facilities located in the United States. Leveraging its digital engineering capabilities and agile engineering methodologies, LTTS replaced the customer’s existing engineering vendors in the US to become its primary engineering partner. Under the deal, LTTS is undertaking multi-discipline plant engineering activities, including site sustenance, discipline engineering and control automation support for both the facilities.

2. Prestigious e-powertrain program from a European auto component major: A leading European auto components manufacturer was looking to establish a sustainable and scalable technology framework for its Electric Powertrain division. LTTS, due to its expertise in developing cutting-edge electric solutions for sustainable transportation was chosen as the primary engineering and technology partner for the project. Under the multi-year program, LTTS’ engineers will be developing digital solutions for the client’s ePowertrain unit. Leveraging on a decade of engineering experience in end-to-end services from design and development to system integration for EVs, LTTS will help the customer set up a real-time technology framework to evaluate the controller design of the ePowertrain systems.

3. Strategic Engineering Partnership with a Global Technology and Medtech Leader to Drive Innovation: A renowned global client in the medical and healthcare sector has chosen LTTS as its strategic engineering partner with a view to expedite the go-to-market time-frame for innovative technologies, as compared to its competition. The client, one of the world’s leading medical technology conglomerates, was looking for partners with the engineering depth and agility to help transform its product portfolio. The customer has leveraged LTTS’ global footprint and deep domain expertise in lifecycle management, sustained engineering support and product development capabilities. The engagement encompasses both hardware and software development, besides enabling statutory compliance across the customer’s product and service offerings.

Global Presence

Human Resource Initiative

1. Managerial Certification

LTTS also launched OmniOpus™ WFX Certified Professional, a customized certification program. It enabled managers to effectively handle projects from a remote location and also to lead team members through the digital mode.

2. ‘Merci Beaucoup’

One of the notable motivational initiatives of the year was ‘Merci Beaucoup’ (‘Thank you’ in French), a program to recognize and thank each employee and their family for their contribution to the Company during the pandemic.

3. Global Engineering Academy (GEA)

With a mission to make its workforce digitally equipped and ready for the future, LTTS set up the Global Engineering Academy (GEA) to provide an opportunity for employees to upskill and reboot their technical skills.

Awards & Recognition

• LTTS’ i-BEMSTM framework was the recipient of Frost & Sullivan’s Customer Value Leadership Award for Global Smart Building Optimization & Experience Management

• LTTS won the Indian Digital Enabler Awards 2020 in the ‘Best Tech for Healthcare’ category for XYZ Synthesizer, a scalable solution that can be easily extended for all kinds of digital and optical microscopes

• CIMS Medica honoured L&T Technology Services as ‘Company of the Year’ in the Best Medical Devices Equipment category for the three-part hematology analyzer, built in partnership with Agappe Diagnostics

• Everest Group has positioned LTTS as a Leader in Industry 4.0 Services in its PEAK Matrix® Assessment 2020

• Zinnov Zones rated LTTS as a Leader across Digital Engineering, IoT, AI and Digital Thread and also positioned LTTS in the Leadership Zone in 6 major verticals for the fourth consecutive year

• Two of LTTS’ digital offerings, Chest rAITM and i-BEMSTM, have been recognized with the 2021 BIG Innovation Awards in the ‘Product’ category presented by the Business Intelligence Group, USA.

• Confederation of Indian Industry (CII) honored LTTS with the HR Excellence Awards 2020

• Honoured with Silver Award for Best Workplace Practices at the annual Financial Express BrandWagon Ace Awards 2020

• TechCircle honoured LTTS’ HR and IT teams with the Business Transformation Award in the ‘New Markets’ category for leading digital transformation at LTTS with innovative solutions

• LTTS won the Brandon Hall HCM Excellence Award for Best Advance in Talent Acquisition Process and Employee Engagement

• LTTS was conferred with the Mahatma Award for CSR Excellence for solar electrification of tribal villages

Management Discussion and Analysis

L&T Technology Services Limited (LTTS) is a leading global pure-play Engineering Research & Development (ER&D) services company. It offers consultancy, design, development and testing services across the product and process development life cycle. LTTS provides services and solutions in the areas of product software, mechanical and manufacturing engineering, embedded systems, engineering analytics and plant engineering. LTTS’ customer base includes 69 Fortune 500 companies and 53 of the world’s top ER&D companies across transportation, telecom & hi-tech, industrial products, plant engineering and medical devices. Our technologists work with global firms to offer smart solutions & services that can accelerate new product development, facilitate remote asset management and enable virtual Product Design & Prototyping. The key differentiators for LTTS’ business are its customer-centric industry innovations, domain expertise, and multi-vertical presence spanning major industry segments.

According to Zinnov, ER&D has borne the brunt of the pandemic impact with almost all crucial verticals seeing de-growth. Global ER&D spend in 2020 stood at ~$1.4 trillion, a 6% de-growth over 2019, the first time since 2012, reflecting the impact of decreased demand from end consumers in verticals like Automotive, Aerospace, Energy & Industrials that translated to corresponding R&D budget cuts.

Zinnov states that Digital engineering continues to drive ER&D spend, with enterprises across verticals increasingly prioritizing their R&D efforts towards building new age digital products and services.

Digital engineering investments in optimization of engineering and manufacturing operations and enhancing the robustness of service delivery platforms will be a key ER&D investment theme in 2021.

Industry analysts also predict that the rapid adoption of intelligent, connected and smart initiatives such as Tele-X, Intelligent workplaces, Contactless commerce, leveraging new age technologies such as Artificial Intelligence, AR/VR, IoT is set to further fuel ER&D spend across verticals and make enterprises anti-fragile.

As per Zinnov, global ER&D spend is likely to grow at a CAGR of 11% over the period 2020-2023 and touch ~$1.9 trillion by 2023, with Digital Engineering being the key driver. 5G, Digital Thread, and Sustainable engineering will be the key catalysts supporting higher Digital Engineering spends.

LTTS benefits from having well-defined offerings in the ER&D sector. The Company’s expertise in traditional and core engineering along with its strength in Digital Engineering and new age technologies like Cloud, AI/ ML helps LTTS position itself as an innovation partner to its customers. With established credentials as innovation provider and leveraging the cross-industry experience, the Company is poised to provide a unique proposition to the clients across industries.

Order wins

Transportation -

LTTS has entered into the new area of Telematics with a leading European OEM. As part of this deal, LTTS will be testing the automobile maker’s next generation of Telematics Unit. The scope of work includes setting up a lab in Munich dedicated for the customer.
LTTS has been selected by a European automotive components manufacturer for providing engineering solutions for their Electronic Powertrain unit. Under the multi-year program, LTTS would be responsible for providing a real-time technology framework to evaluate the controller design of the e-Powertrain systems.
A leading global OEM awarded LTTS the ownership of Digital Product Management for all its automotive component design data across categories like Chassis, Interior, Exteriors, Electrical wire harness. This will also entail co-Investment for Automation and Productivity Improvement tools which would further lead to overall cost optimization for design & development.
An Aerospace and Defense conglomerate awarded LTTS a program to provide in-field product insights using LTTS’ proprietary Industrial AI platform AIkno®. LTTS will also support the customer for engineering supply chain optimization, upgrades and improvement through should costing.
LTTS won a deal from one of the world’s leading mobility OEM for a marine digital solution to provide solutions in areas including Hardware-IoT Platform, Cloud Infra, Mobile App and Customer Support Managed Services.
LTTS has won a multi-million-dollar deal in the Powertrain domain to support a leading Automotive Tier-1 Company. LTTS will support end-to-end OEM Programs encompassing System engineering, Software development, HIL Test & Validation.
For an American Industrial conglomerate, LTTS is leveraging its ITAR facility in North America to develop electrical and mechanical systems for military vehicles.
LTTS was awarded a product engineering services deal to develop autonomous solutions for a global provider of Automotive technology and set up a CoE for the development and sustenance of legacy engineering software applications.
LTTS won a project to take ownership of multidisciplinary engineering design activities for an OEM involved in Energy generation solutions.
A leading global Tier1 firm has partnered with LTTS to build a hybrid unified business engagement that will drive engineering process harmonization across their global locations enabling shorter time to market.
A leading Aerospace company selected LTTS as its strategic engineering partner to provide engineering and digital support across multiple domains including Avionics, PLM, Structures and Systems.

Telecom & Hi-tech -

LTTS was selected as a strategic technology partner by one of the world’s leading technology companies to carry out Platform Validation for its high-performance Data centres which is part of a joint CoE set up.
A European Telecommunications company has awarded LTTS a program to orchestrate its vast core network across Europe consisting of various routers, switches and gateways for video streaming and other data services.
A global Telecommunications company has selected LTTS as its engineering services partner to perform end-to-end system integration and allied engineering services for its global operations.
LTTS won a deal to set up a dedicated engineering analytics lab for one of the world’s leading technology companies. The lab to be set up in Bangalore, India will be providing system validation and software engineering for the customer’s new line of server platforms.

Industrial and consumer product -

Schindler selected LTTS as its key partner to provide innovative digital engineering capabilities. LTTS is providing product development, innovation and engineering services & solutions to help Schindler accelerate its digitalization and connectivity initiatives.
LTTS won a deal in Infotainment Systems from the automotive component business of one of the largest multinational electronics companies. LTTS will support the customer in system validation for multiple OEM programs in a managed services engagement model.
LTTS has been chosen as the Integration and Migration partner by a global wind turbine manufacturer to support the client in migration of PLM & CAD data from a joint venture to the parent company’s platform. Showcasing its end-to-end engineering expertise in Data Migration and Digital domain, LTTS conducted a thorough feasibility study of the migration, and developed the complete analytics solution, architecture and requisite engineering support for Cloud to On premise PLM application.
A leading Chemical and Consumer goods company has chosen LTTS as its Engineering Partner in the North America region for design, engineering & turnkey support for installation and commissioning of packaging lines.
A leading Industrial Automation company has awarded LTTS a project for creating a low-cost variant of their popular power drive and fast track its release to market.
LTTS has won an Engineering Application Modernization program from a diversified American conglomerate to support the client’s software driven modernization initiative. LTTS engineers will maintain and upgrade the company’s existing suite of applications to make them mobile and cloud enabled.
For a major wind turbine manufacturer LTTS is setting up a dedicated Global Engineering Hub which will drive the client’s global product roadmap. LTTS will be supporting its product design and development, manufacturing and PLM and analytics roadmap.

Plant Engineering -

LTTS won its biggest deal ever with a TCV of USD 100 million plus from a global O&G major to be the primary engineering partner to support two of the customer’s integrated refining and chemicals manufacturing facilities in USA.
LTTS is setting up an India Software Engineering Centre (ISEC) for a global oilfield services company, to support all its product services lines. The engineering centre will focus on data analytics platform development, validation and testing services.
One of the world’s top plastics, chemicals and refining manufacturers has awarded LTTS a multiyear plant engineering engagement to implement digital twin modelling for its capital projects spread across 20+ sites in North America.
LTTS was chosen as a strategic partner by a world leading engineering & construction Oilfield Services company to carry out multi-disciplinary Engineering activities for its capex & opex projects globally.
LTTS has been selected as an engineering partner by a multinational Oil and Gas company to provide 3D modelling and digital twin services for its oil and gas assets. Under the multi-year agreement LTTS will carry out data preparation, conversion & modelling activities for the customer’s global portfolios across both upstream and downstream assets.

Medical Devices -

A U.S.-based Medical Devices company has awarded LTTS a program to design equipment for intraocular lens manufacturing. The LTTS engineering team is also involved in next generation cataract surgical product development.
A Leader in Healthcare devices and homecare has selected LTTS as a strategic global engineering supplier to assist in transforming its product portfolio. LTTS will bring its deep engineering domain expertise to support the customer on workstreams for Lifecycle Management, New Product Development, Digital Engineering and Quality & Regulatory needs.
LTTS won a project from a Medical Electronics equipment maker to design and develop a new blood cell counter product and launch it in the international market. LTTS will also help conduct technical feasibility of systems hardware, and testing and benchmarking of the product for the customer.
A Medical Devices company has awarded LTTS a design enhancement project for its surgeon console and robotic arm subsystems. LTTS will offer Product Design Services in the customer’s Surgical Robotics operating unit. LTTS will also be providing engineering support and maintenance for the customer’s range of robotic subsystems.

Partnership / Alliance / Technology Investment

Amazon selected LTTS as a Consulting and Professional Services partner to support Alexa integration in various connected devices spanning multiple domains and industries.
L&T Technology Services set up a dedicated engineering hub for Airbus after the global aerospace manufacturer selected LTTS to provide technology and digital engineering solutions for its Skywise platform
LTTS launched a virtual clone of the Think Studio where its engineers are involved in various activities from design ideation to engineering excellence to prototyping samples and patenting design rights for mass production.
LTTS, in association with Tenneco’s DRiV™ Ride Performance Division, inaugurated the DRiV HUB Development Center at LTTS’ Bangalore delivery center. LTTS is creating engineering tools to support DRiV in developing intelligent suspension technologies to build next-generation ride control solutions.
In partnership with LTTS, diagnostics reagents and equipment manufacturer Agappe Diagnostics in September launched Mispa Count X, India’s first indigenously developed blood cell counter.
LTTS set-up and virtually launched a state-of-the-art Electric Vehicle (EV) Lab at the Bengaluru design centre which would help customers across the globe to evaluate and verify the performance, endurance and electromagnetic compatibility of EVs.
LTTS’ team of engineers developed Chest-rAITM which is an AI based chest X-Ray radiology suite for diagnosis and reporting intelligence. The suite has the potential to detect 34 of the most common lung related abnormalities, covering more than 85% of diagnosis encountered at medical institutions.
LTTS’ engineers created and launched the virtual clone of its Wet Lab where chemicals and potential hazardous material are handled in a controlled environment.
Exponential-e, a UK-based leading & innovative CSP of enterprise connectivity & unified communications services, entered into a strategic partnership with LTTS to jointly offer workplace transformation solutions to customers working in the post COVID environment. LTTS deployed latest solution i-BEMS™ Shield, built on the Company’s award winning i-BEMS™ framework, and anchored on Exponential-e’s next-gen composite SDN carrier grade network & Cloud infrastructure.
LTTS also expanded its collaboration with Microsoft Corporation and launched its latest and enhanced version of the state-of-the-art i-BEMS™ solution on Microsoft Azure to transform buildings into future ready smart campuses.

Mergers & Acquisition

LTTS through its wholly owned subsidiary L&T Technology Services LLC, acquired 100% stake in Orchestra Technology Inc., a specialist technology solutions provider for the Telecom industry, effective October 2, 2020. Orchestra is based in Texas, USA and will bolster LTTS’ offerings in the areas of Network Engineering & Enterprise Mobility. It will also provide LTTS strategic access to Telecom service providers who are investing in next generation digital systems for 5G and IoT networks.

Significant Factors affecting LTTS

LTTS business growth depends on the global ER&D spending by corporates, the quantum of ER&D outsourced to third party vendors and the ability of LTTS to develop competencies to address the ER&D needs of its customers. On the operational side, LTTS performance depends on the Utilization rate of its billable employees, ability to command higher bill rates for its offerings, effective talent management addressing hiring, skilling and retention of high quality resources, management of foreign exchange volatility risk since a significant portion of business is billed in currencies like USD and EUR, and the onsite-offshore revenue mix as profit margins are typically higher if work is performed offshore as compared to onsite.

From a regulatory and compliance standpoint, LTTS business sustainability requires protecting the confidentiality and intellectual property rights of our customers failing which we could be liable for damages, being compliant to the local regulations that include immigration and data protection laws, in every country we are present in.

Performance Highlights

Revenue contribution by geography

Debt

Current Asset

Investments comprises of Investments in mutual funds & Corporate Deposits, which improved from ` 6,110 Million as at March 31, 2020 to ` 15,149 Million as at March 31, 2021 on account of better free cash flow generation.

Other financial assets consisting advance to employees, security deposits, forward contract receivable, etc. which decreased from ` 1,731 Million as at March 31, 2020 to ` 1,685 Million as at March 31, 2021 primarily on account of Unbilled Revenue (T&M accruals).

Other current assets decreased primarily on account of Unbilled Revenue.

Remuneration

The median remuneration of employees of the Company during the financial year was Rs.8,78,111. In the financial year, there was an increase of 0.96% in the median remuneration of employees

There was no Average Annual increase in the salaries of India-based and overseas employees. The average increase in managerial remuneration was 4%. The average increase in Managerial remuneration is not comparable since the increase is on account of exercise of stock options by the Executive Directors and payment of commission to Non-Executive Directors.

Executive Director

Shareholding

Shareholder holding more than 5% of equity

Credit Ratings

The ratings continue to LTTS’s strong business risk profile, supported by enhanced focus on new client acquisition, wider product offerings, and increasing share of business with existing clients. While performance in Q1 fiscal 2021 was impacted on account of decline in demand and budget cuts by end users, performance improved sequentially since, in line with recovery in end user industries.

The niche presence in value-added segments and focus on emerging areas such as medical devices, process engineering, and industrial automation will aid sustained healthy growth in revenue 10-15% and operating profitability of about 19-20% over the medium term. The company continues to maintain a healthy financial risk profile, and robust liquidity, which too are expected to continue over the medium term.

The ratings also reflect the strategic focus of the parent, Larsen & Toubro Ltd (L&T; rated ‘CRISIL AAA/FAAA/Stable/CRISIL A1+’) under the L&T Nxt initiative towards service based businesses such as information technology (IT), and financial services with the objective of reducing the dependence on capital intensive and low margin businesses. L&T is eyeing more than USD 1 billion revenue from its newly launched new-age technology platform L&T Nxt in the next five to seven years and LTTS is set to play a major role in this. Over the years, the contribution of service based business towards group’s overall business, both in terms of revenue and profitability has also been improving.

Furthermore, the company will continue to benefit from the strong managerial and operational support from its parent, and the overall strength of the L&T brand. These strengths are partially offset by its geographical concentration in its revenue profile.

Key Rating Drivers

Strength

1. Large diversified clientele - Clients currently include 69 of the global fortune-500 companies and 53 of the top 100 R&D spenders. This has enabled the company to withstand the slowdown pressures as exposure is not restricted to a particular end-user industry.

On account of continuous focus on R&D and building new platforms solutions, the company has been able to expand the revenue share from existing clients and maintain steady acquisition of new clients. Similar growth and profitability is expected to be maintained over the medium term, thereby supporting the overall business risk profile.

2. Strong financial risk profile - The company’s financial profile continues to be strongly supported by healthy cash accruals, almost debt free balance sheet and robust liquidity (cash surpluses of ~Rs. 1450 crore as on December 31, 2020). Capital spending is expected to remain moderate (Rs 80-100 crore); this and incremental working capital needs are likely to be funded through cash accruals.

3. Strong managerial, operational, and financial support from L&T; increased strategic importance of the IT business for the group - There is commonality in the board of directors and entire operational teams have moved as part of the strategic business unit (SBU) to LTTS. Even though the financial risk profile of LTTS is sound, support from the parent exists for any exigency. L&T had invested Rs 750 crore in the form of preference shares in the company in addition to Rs 300 crore of equity share capital for the buyout of these SBUs. The 10% preference shares (redeemable at par) subscribed by L&T were converted to equity in May 2016, and the company was listed in September 2016.

Further, being an L&T group company, LTTS also benefits from the strong brand and domain expertise available within the group, resulting in better penetration and acceptability in the market. Treasury operations are supported by L&T Treasury, and critical treasury decisions are taken by the Treasury Committee, which consists of members from L&T and LTTS.

Weakness

1. Geographical concentration in revenue profile - Dependence on the US market is high, with over 60% of the revenue coming from the US in fiscal 2020 and first nine months of fiscal 2020. Although geographical diversity mitigates business risk, the skew in revenue is unavoidable given that the US is the largest IT spender in the world, with the US contributing over 60% of the industry’s revenues.

2. Increasing competition in the engineering services business - LTTS is an engineering services provider focused on offering innovative design and development solutions across the product development value chain, for industries such as industrial products, transportation, aerospace, telecom and the process industry. Given the healthy growth prospects in this segment many IT firms have forayed into the engineering services business in the last few years resulting in increased competitive intensity.

Given the increasing competition and the resultant pricing pressures, the ability to introduce new innovative products/platforms will remain extremely critical to maintain competitive advantage. Further, players will have to maintain an efficient cost structure, ensuring effective resource retention and utilization while remaining responsive to the dynamic nature of the industry

Rating Sensitivity factors

Downward factors

Significant decline in revenues by over 10% and deterioration of operating margin to below 12%, adversely impacting cash flows
Sizeable debt-funded acquisition, leading to weakening of debt protection metrics or liquidity
Change in the strategic focus of parent L&T towards service-based businesses and/or deterioration in credit risk profile of the parent.