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IPO Note

05 July 2016

L&T Infotech Ltd

Background & Operations:

Issue Snapshot:
Issue Open: July 11 - July 13 2016
Price Band: Rs. 705 710 (Discount of Rs
10 on issue Price (per equity share) to all
eligible retail applicants)
Issue Size: 17,500,000 Equity Shares entirely offer for sale by L&T
Offer Size: Rs.1233.75 1242.50 crs
QIB
upto
8,750,000 eq sh
Retail
atleast 6,125,000 eq sh
Non Institutional atleast 2,625,000 eq sh
Face Value: Re 1
Book value: Rs 119.11 (March 31, 2016)
Bid size: - 20 equity shares and in
multiples thereof
100% Book built Issue
Capital Structure:
Pre Issue Equity:
Post issue Equity:

Rs. 16.98 cr
Rs.16.98 cr

Listing: BSE & NSE

Book Running Lead Manager: Kotak
Mahindra Capital Company Limited,
Citigroup Global Markets India Pvt Ltd,
ICICI Securities Ltd
Registrar to issue: Link Intime India Pvt
Ltd
Shareholding Pattern
Shareholding Pattern

Pre
Post
issue % issue %

Promoters & Promoter 94.94

Group
Public (incl institutions
5.06
& employees)
Total
100.0

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84.64
15.36
100.0

L&T Infotech Ltd (LTIL) is one of Indias global IT services and solutions companies. LTIL was
amongst the top 20 IT service providers globally in 2015 according to the Everest Groups PEAK
Matrix for IT service providers. Its clients comprise some of the worlds largest and well-known
organisations, including 49 of the Fortune Global 500 companies. It offers an extensive range of
IT services to its clients in diverse industries such as banking and financial services, insurance,
energy and process, consumer packaged goods, retail and pharmaceuticals, media and
entertainment, hi-tech and consumer electronics and automotive and aerospace. Its range of
services includes application development, maintenance and outsourcing, enterprise solutions,
infrastructure management services, testing, digital solutions and platform-based solutions and
serves its clients across these industries, leveraging its domain expertise, diverse technological
capabilities, wide geographical reach, an efficient global delivery model, thought partnership
and new age digital offerings.
LTIL leverages the strengths and heritage of its Promoter, Larsen & Toubro Limited, a leading
Indian conglomerate in engineering, construction, manufacturing, finance and technology. The
L&T group provides it with access to professionals with deep industry knowledge in the sectors
in which it does business. Its growth has been marked by significant expansion of business
verticals and geographies in which it do business. Besides India, it provides services globally
and the percentage of its revenue from continuing operations from North America, Europe,
Asia Pacific and the rest of the world amounted to 69.0%, 17.4%, 2.0% and 5.8% for Financial
Year 2016 and 68.6%, 17.9%, 2.4% and 6.9%, for Financial Year 2015, respectively. As of May
31, 2016, it had 22 Delivery Centres and 41 sales offices globally. As part of a business
restructuring exercise conducted by its Promoter, all engineering services businesses of its
Promoter have been consolidated under a separate subsidiary of its Promoter, LTTSL. As part of
this restructuring, on January 1, 2014, it sold and transferred the assets and liabilities of its PES
Business to LTTSL.
LTILs revenue from continuing operations increased by a CAGR of 13.5% from Rs 45,351.64
million in Financial Year 2014 to Rs 58,470.60 million in Financial Year 2016. Its revenue from
continuing operations increased by a CAGR of 13.50% from Rs.45,351.64 million in Financial
Year 2014 to Rs.58,470.60 million in Financial Year 2016. Its USD revenue from continuing
operations comprise amounts in foreign currencies across its operations, excluding the United
States, that are converted into USD using the month-end/day-end exchange rates for the
relevant period. In USD terms, Its revenue from continuing operations increased by a CAGR of
9.0% from USD 746.6 million in Financial Year 2014 to USD 887.2 million in Financial Year 2016.
Net profit from continuing operations increased by a CAGR of 18.2%, from Rs. 6,598.48 million
in Financial Year 2014 to Rs. 9,223.06 million in Financial Year 2016. Its total number of
employees increased by 13.9%, from 17,627 as of March 31, 2014 to 20,072 as of March
31,2016.
Objects of Issue:
The objects of the Offer are to achieve the benefits of listing the Equity Shares on the Stock
Exchanges and to carry out the sale of up to 17,500,000 Equity Shares by the Selling
Shareholder. The listing of the Equity Shares will enhance the brand name and provide liquidity
to the existing shareholders. The listing will also provide a public market for the Equity Shares
in India. LTIL will not receive any proceeds from the Offer.

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Competitive Strengths:
Strong domain focus enabling Business-to-IT Connect: LTIL is among the few IT service providers that are part of a diversified business
conglomerate. It is a part of the L&T group, whose businesses span multiple industry segments. It benefits from the expertise and experience
of the L&T group in verticals such as hydrocarbons, heavy engineering, oil and gas and automotive and aerospace. This provides it with the
benefit of strong domain experience and understanding of businesses that operates in these verticals, which assists in developing and
delivering IT services and solutions that benefits the clients in these verticals and differentiates it from its competitors.
Business-to-IT Connect proposition provides LTIL with an advantage over competitors in that it is able to capitalise on strategic opportunities
at a faster pace due to the readily available domain and institutional knowledge at its disposal. Over the past ten years, it has built a strong
domain orientation across its business verticals in the way it approach its clients with solutions to their business objectives and the way it
deliver services to them.
Strong parentage and brand equity of Promoter: The L&T brand is one of the most well-respected brands in India, which provides LTIL
with a competitive advantage, particularly in: attracting talent and new clients; benefiting from its Promoters global network; exploring
potential business opportunities; best corporate governance practices; accessing capital; and establishing itself as a thought partner with the
top management of many global corporations. Its Promoters parentage has contributed towards the growth in the IT services industry, and
will continue to help it achieve its strategic objectives.
Established long-term relationships with clients: Client relationships are the core of LTILs business. Its clients include many leading
businesses, including 43 of the Fortune Global 500 companies. Its track record of delivering an extensive range of solutions using its global
delivery model, demonstrable industry and technology expertise, and sensitivity to its clients feedback, has helped it forge strong
relationships with its major clients. It has a history of high client retention and derive a significant proportion of its revenues from repeat
business (defined as repeat business generated in the preceding Financial Year) built on its successful execution of prior engagements. LTIL
has an active and institutionalised approach for managing client relationships. It engages its clients by having a collaborative sales and
marketing model where its sales, solutions and delivery teams participate in the sales process. While its sales and account managers assist
its clients in day-to-day account management, members of its executive team also help manage strategic client accounts. These relationships
has helped it to better understand its clients business needs and enabled it to provide effective solutions to meet these needs.
Extensive portfolio of IT services and solutions: LTIL has an extensive portfolio of IT services that it offers its clients to address their different
business and technology needs. It has continuously invested in broadening its IT service portfolio to span consulting, IT services and software
platform-based services, which it tailor to its clients specific needs and industries in which they do business. The solutions that LTIL provides
its clients are technology agnostic. Its extensive portfolio of IT services and solutions enables it to grow its client relationships and scope of
engagements, as well as instill its clients with confidence in its ability to address their diverse and dynamic business needs.
Focus on emerging technologies: LTIL looks to assist its clients to engage the future through its focus on emerging technologies. it invest in
new technologies and track new business trends and believe that every industry will increasingly adopt digital as a key component of its
overall IT solutions and services expenditures. Over the past few years, it has aligned its existing areas of expertise and has created focused
initiatives in developing capabilities in emerging technologies, which it eventually intends to offer under a specific brand.
Track record of established processes and executing large, end-to-end, mission critical projects: LTIL has a reputation for delivering high
quality IT solutions and services, as well as timely project completion within agreed cost parameters. It has expanded its offshore, onshore
and near shore presence, thus growing and developing its global delivery model and the services it provides, which are, as a result,
sufficiently flexible to be adapted to respond to its clients objectives, particularly with respect to security, scalability and cost. LTIL has a
track record of executing a number of large, end-to-end, mission critical projects in diverse business areas and technology domains for
clients. As part of its execution of large and complex projects, it leverage its expertise in providing comprehensive project/ programme
management through its global delivery model and its clients benefit from its experience in multiple technologies, industry knowledge,
project management expertise and proprietary software engineering tools developed in-house. The Company has successfully competed
globally to win projects and its success in such engagements has enhanced its recognition in the global marketplace.
Strong management culture: LTIL has built a strong management culture, which has been influenced by its Promoters core values and work
ethic. Since it started doing business, its Promoter has instilled in it its sense of purpose and passion in the manner in which it does business,
and it cherish and live by those values. LTILs management team comprises seasoned technology professionals with global experience, as
well as professionals with deep experience in the domains of its clients, which has helped it to deliver strong financial performances
consistently. This blend, together with a strong management culture, helps its management team develop deep insights, anticipate trends in
the market, and devise and execute its companys strategy effectively.

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Conducive work environment to attract and retain talent: People are critical to LTILs business and its ability to grow depends to a large
extent on its ability to attract, train, motivate and retain employees. It has a highly skilled, well-trained and diverse employee base, which
provides it with the flexibility to adapt to the needs of its clients and the technical requirements of the various projects that it undertakes. It
is committed to the development of expertise and know-how of its employees, as demonstrated by regular technical seminars and training
sessions organized by it. LTIL focus on performance management, providing input on leadership qualities, mentoring and periodic reviews
for career alignment and planning.
Business Strategy:
Focus on a targeted client portfolio: LTIL intends to continue building long-term sustainable business relationships with its existing clients to
generate greater revenues. As part of the foregoing strategy, it plans to have an optimal client portfolio to better focus and serve its clients
across the geographies and industries in which it does business. It has a track record of high client retention and as its client relationships
mature and deepen, it seeks to expand the scope of services offered to those clients to achieve incremental revenue growth. LTILs ability to
establish and strengthen client relationships and expand the scope of services it offers to clients will help it grow its revenues and profits.
Targeting higher total contract values: LTIL is targeting clients who have the potential to offer opportunities with large total contract values.
It intends to originate large engagements by either identifying opportunities with its existing client accounts or by targeting new clients
whose existing engagements with IT vendors will be up for renewal. It plans to achieve a higher value client portfolio by focusing on annuity
applications and infrastructure management service deals, which tend to be long-term in nature. Furthermore, it is in the process of
investing in and building sales operations capabilities to establish standardised processes to facilitate its targeting of larger and higher-value
client engagements. The foregoing will enable LTIL to deliver greater value-added IT solutions to its clients businesses and increase its share
of their IT expenditures.
Continue to focus on emerging technologies: LTIL regularly tracks new technologies, industry segments and market trends in the IT
solutions market and believe that digitalisation will increasingly become systematically critical in the future. It plans to further enhance its
digital platforms, build industry and technology frameworks, the internet of things, business process digitalisation and end-to-end digital
transformational delivery capabilities. With respect to business process digitalisation, it plans to further develop automation tools providing
greater value-added propositions to its clients to bring about business processing efficiency for them. Further, it plans to invest seed capital
in startups, which will allows it to benefit from their innovation capabilities and digital offerings. This will help it to enhance its digital
offerings and in turn, give a platform and opportunity to scale up to startups. In addition, as part of its strategic focus in India, it is inter alia
positioning itself to cater to Smart Cities opportunities that it has identified therein.
Expand focus on infrastructure management service offerings: LTILs IMS service practice offers a wide spectrum of end-to-end services
covering IT infrastructure consulting, design, managed services, migration services, operational support, desktop support, and Cloud
enablement, hosting and migration. It aims to leverage its Business 1st approach with respect to IMS, which provides extensive services
to clients inter alia using application development, maintenance, support and testing services, which collectively assist its clients automate
their business processes through customised service delivery plans that are aligned with their business needs and objectives. In addition, it is
currently looking for strategic acquisition opportunities in relation to its IMS business. It is specifically looking to acquire a complementary
business, technology, service or product that can provide it with access to new markets, capabilities or assets in relation thereto.
Expand geographical presence: LTIL market and distribute its solutions directly through its global delivery model. While it intends to
continue expanding its presence in the United States and Europe, it also plans to expand its geographical reach in other markets that it has
identified as having potential, including Australia, Singapore, Japan, South Africa, India and the Middle East. It is in the process of
augmenting its teams in these markets to further explore the opportunities therein. With respect to its operations in South Africa, the Nordic
region and the Middle East, it views these regions as gateways to the rest of Africa, Eastern Europe/the Baltic region and the Middle
East/North Africa region, respectively. As such, it intends to allocate resources to these markets not only for pure-play market opportunities
therein, but also as stepping-stones to other client opportunities that it can identify through greater regional experience, expertise and client
referrals. LTIL has identified Germany, France and the Nordic region as important markets for it going forward and would like to enhance its
capabilities and address gaps in language capability, industry expertise, technical expertise and geographic coverage in these countries. As
such, it is also currently contemplating pursuing strategic acquisitions in these markets.
Strengthen brand name in the Indian and global IT services market: The L&T brand is well-established as one of Indias most prominent
conglomerates and has benefited from such parentage. At the same time, it intends to further strengthen its L&T Infotech brand by
continuing to deliver high quality services to its clients, enhancing its market positions in the markets in which it do business and becoming a
thought partner with its clients. It also plans to conduct various customised client events, including seminars, roundtables and breakfast
sessions on identified industry or technology specific themes with a view to delivering a focused message on its capabilities, experience and
value proposition relevant to the specific theme. In addition, it connects with academia through its campus connect programmes and look to

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further build its brand by attracting the best talent. An established record of excellence, the foregoing initiatives and the listing of the Equity
Shares will enhance the visibility of its brand name, contribute to its recruitment and retention initiatives and strengthen its recognition as a
leader in the Indian IT services industry.
Focus on greater internal operational efficiency: LTIL plans to continue developing and investing in frameworks, accelerators, in-house
proprietary solutions and customised software processes to drive efficiencies internally. It also plans to increase its profitability by
streamlining its cost structure with a focus on high employee utilisation and optimising resource mix. It has a specific department to identify
and implement direct cost reductions in its operations. It plans to automate various project delivery processes as well as internal IT service
processes to enhance human productivity and once various tools are developed in relation thereto, it plans to institutionalise their usage
across its business units, which will provide it with the appropriate business platform to be more efficient. It also plans to introduce specific
business process digitalisation initiatives in relation to its business verticals and service lines for it to realise operational cost savings. The
foregoing initiatives will allow LTIL to move up the value chain with respect to services offered.
Industry:
The Indian IT-BPM Industry Overview and trends
According to NASSCOM, the Indian IT-BPM industry is projected to grow at 8.5 per cent in fiscal year 2016, an addition of USD 11 billion. The
aggregate growth rate has been affected by the strengthening of the US dollars against the Indian rupee, which is projected to bring the
domestic market growth rate down to approximately 3.2 per cent. (see chart below). (Source: NASSCOM Report)
Growth of India as an IT-BPM Service Delivery Location
The Indian IT-BPM industry grew from an approximately USD 1 million industry size in the 1980s to a nearly USD 143 billion industry in fiscal
year 2016. Further, the industry has gone from employing less than a million people in the 1980s to emerging as Indias largest private sector
employer with approximately 3.7 million employees. (Source: NASSCOM Report)
According to NASSCOM, there are certain key factors, which define Indias attractiveness as a key IT-BPM service destination:
A connected and a digital ready market. An increasing population of 1.2 billion people with a large potential middle class and large numbers
of mobile phone subscribers and mobile internet present a hard-to-ignore end user market for the world. The government of India is
expected to invest heavily in digital investments (such as Digital India, eGovernance).
Maturity Excellence in business delivery: Over the last quarter of a century of its existence, Indias IT-BPM has succeeded in creating a
worldwide presence onshore, offshore, nearshore for its customers. Present in over 78 countries through about 670 offshore
development centres, this industry boasts approximately 75 per cent of Fortune 500 enterprises as its customers. The industry landscape
consists of over 16,000 firms ranging from multi-billion dollar firms to start-ups that are emerging as the hotbed for innovation and
disruptive services.
High volume of diverse, employable talent: India currently has over 6 million graduates; its IT-BPM employee base for fiscal year 2016 is
estimated at 3.7 million people, the largest private sector employer.
Worlds fastest growing digital hub: Digitally skilled employees number 250,000 analytics (90,000), mobility (70,000) and cloud & social
media (70,000).
Digital at the core of innovation:
Product innovation: 3rd largest base globally; >4,200 start ups; 1,200 start ups in 2015; 250per cent growth in funding in B2B space over last
year
Business innovation: New business models, differentiated pricing strategy; shift from size to business agility
Process innovation: Business process alignment, technology advancement to enhance customer impact, efficiency to transformation and
process driven service excellence
Key emerging industry trends
Trends in the exports markets
According to NASSCOM, exports in fiscal year 2016 are estimated at USD 108 billion, a 10.3 per cent annual growth. ER&D and product
development continued to be the fastest growing segment at 12.6 per cent driven by trends around IoT/connected devices and customers
demands for disruptive innovation. IT services are expected to grow at the same rate as overall exports. Demand for SMAC technologies is

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pushing the need to modernise legacy systems and cloud solutions. BPM exports, at an approximately 9 per cent year-on-year growth, are
being driven by BPaaS, mobility and advanced analytics. (Source: NASSCOM Report)
Trends in the domestic market
The growth in domestic IT services was driven by IS outsourcing, cloud services and increasing adoption from all customer segments
government, enterprise, consumers and SMBs. The governments digital India and e-governance agenda has given a boost to the domestic
sector in an enormous way. The governments expected investments in digitization, infrastructure improvement, implementing technology in
healthcare, manufacturing and agriculture sectors is expected to provide an opportunity of around USD 5.9 billion to the IT services sector.
The e-governance agenda of reforming government through technology by enabling customer services, providing electronic delivery of
services through e-education, e-healthcare etc is also expected to be a major demand driver. (Source: NASSCOM Report)
Trends of IT spend in key verticals
Banking
ISG notes that the banking industry worldwide is in a state of flux. In Europe a lower economic outlook, low interest rates, increasing
regulation and regulatory penalties continued to impact the financial performance of large banks in 2014. In the Asia Pacific, and particularly
in India growth in new bank licenses and grants of differentiated banking licenses such as payment banks is expected to drive outsourcing
spending. Ever-changing and increasing regulations, escalating compliance costs and higher capital requirements are impacting banks
profitability and return ratios. That creates pressure to reduce operating costs and improve return ratios. Banks now also need to cater to
the millennial generation, which has demonstrated a preference for alternate and emerging channels. These pressures are driving
outsourcing spend in the vertical, apart from spending related to compliance initiatives. (Source: Momentum Market trends and insights
report - 2015 Vertical Industries Report, Information Services Group, June 2015 (the ISG Report))
New age customers in focus, innovation in demand: ISG notes that millennials are one of the largest customer segments for most retail
banks. Clients are interested in partnering with service providers that have developed specific capabilities in segmenting customers based on
transaction history; can enable custom offerings; and can help engage, mine and retain their millennial clientele better. (Source: ISG Report)
Higher cost of compliance: Banks continue to face challenges in meeting regulatory compliance requirements. These requirements have
been driving outsourcing spend for the last few years in the vertical. ISG observes that mature clients in the vertical are engaging with
service providers that enable them to optimize compliance spending through automation and other efficiency enhancements. (Source: ISG
Report)
Regional banks - an area of opportunity for smaller service providers: Regional banks continue to invest in automation, process and
productivity enhancements and in alternate channels. Their focus on productivity improvement and cost rationalization provide a huge
opportunity for smaller service providers to make inroads into this market and help first time outsourcers. (Source: ISG Report)
Competition from non-traditional firms lead to new investments: Non-bank lenders have made significant inroads into core banking activities
such as lending and payments over the last few years. These firms include microfinance, insurance companies, venture capital and private
equity firms, asset management firms, and peer-to-peer lending companies. Such competition from new age firms is forcing banks to invest
in new and alternate channels, as well as data management and predictive analytics platforms. They are also optimising processes for
quicker turnaround of business requests and lowering transaction costs for the end customer while ensuring stickiness and higher lifetime
value. (Source: ISG Report)

Key Concerns:
Business will suffer if LTIL fails to anticipate and develop new services and enhance existing services in order to keep pace with rapid
changes in technology and the industries on which it focuses: The IT services market is characterised by rapid technological changes,
evolving industry standards, changing client preferences, and new product and service introductions that could result in product
obsolescence and short product life cycles. Its future success will depend on its ability to anticipate these advances, enhance its existing
offerings or develop new service offerings to meet client needs, in each case, in a timely manner. Additionally, during the regular course of
operating its business, it may adjust its future plans as a result of its research, experience, technology evolution and market demand. A shift
in its plans may result in the use of other technologies. Other technologies may in the future prove to be more efficient and/or economical
to it than its current technologies.
Intense competition in the market for technology services could affect pricing: LTIL operates in an intensely competitive industry that
experiences rapid technological developments, changes in industry standards, and changes in customer requirements. Its competitors
include large IT consulting firms, captive divisions of large multinational technology firms, large Indian IT services firms, in-house IT
departments of large corporations, in addition to numerous smaller local competitors in the various geographic markets in which it operates.

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The technology services industry is experiencing rapid changes that are affecting the competitive landscape. It may face competition from
companies that increase in size or scope as the result of strategic mergers or acquisitions, which may result in larger competitors with
significant resources that benefit from economies of scale and scope. If LTIL competitors develop and implement methodologies that yield
greater efficiency and productivity, it may be able to offer services similar to it at lower prices without adversely affecting their profit
margins. Additionally, its ability to compete also depends in part on factors outside of its control, such as the price at which the competitors
offer comparable services, and the extent of its competitors responsiveness to their clients needs.
Revenues, expenses and profitability may be subject to significant fluctuation and hence may be difficult to predict: LTILs revenues,
expenses and profitability are likely to vary significantly in the future from period to period. A significant portion of its total operating
expenses, particularly expenses related to personnel and facilities, are fixed in advance of any period. As a result, unanticipated variations in
the size and scope of projects, as well as unanticipated cancellations, contract terminations or the deferral of contracts or changes occurring
as a result of its clients reorganising their operations, or unanticipated variations in the number and timing of projects or employee
utilisation rates, or the accuracy of estimating resources required to complete ongoing projects, may cause significant variations in operating
results in any particular period. In addition, demands for higher compensation could lead to employee disputes and, potentially, work
stoppages or slowdowns.
Exchange rate fluctuations in various currencies in which L&T does business could negatively impact the business, financial condition and
results of operations: Although LTILs reporting currency is in Rupees, it transact a significant portion of its business in several other
currencies, primarily USD and Euro. The exchange rate between the Rupee and foreign currencies has fluctuated significantly in recent years
and may continue to fluctuate in the future. Any significant appreciation of the Rupee against foreign currencies in which it does business
can fundamentally affect its competitiveness in the long-term. As its financial statements are presented in Rupees, such fluctuations could
have a material impact on its reported results.
Revenues are highly dependent on clients primarily located in North America and Europe: In Financial Years 2016 and 2015, 69.0% and
68.6%, respectively of LTILs revenue from continuing operations were derived from its North America segment. In Financial Years 2016 and
2015, 17.4% and 17.9%, respectively of its revenue from continuing operations were derived from its Europe segment. If the economy in
North America or Europe is or becomes volatile or uncertain or conditions in the global financial market were to deteriorate, if there are any
changes in laws applicable to it, or if any restrictive conditions are imposed on it or its business, or if the values of the currencies in which it
does business decline, pricing of its services may become less favourable for it and its clients located in these geographies may reduce or
postpone their technology spending significantly. Reduced spending on IT services may lower the demand for its services and negatively
affect its revenues and profitability. Any significant decrease in the revenues or revenue growth of any one of these industries or service
lines, or widespread changes in any such industries or service lines, may reduce or alter the demand for its services and adversely affect the
revenue and profitability. Further, any significant consolidation within the industries in which its clients operate may consequently affect the
clients ability in that industry to continue using its services.
Challenges in relation to immigration may affect ability to compete for, and provide services to, clients in the United States and/or other
countries: LTILs employees who work onsite at client facilities or at its facilities in the United States on temporary or extended assignments
typically must obtain visas. If United States immigration laws change and make it more difficult for it to obtain non-immigrant visas (i.e., H1B and L-1 visas) for its employees, its ability to compete for and provide services to its clients in the United States could be impaired.
Besides the United States, immigration laws in other countries in which it seeks to obtain visas or work permits may require it to meet
certain other legal requirements as conditions to obtaining or maintaining entry visas, such as maintaining a defined ratio of local to foreign
employees. The inability of project personnel to obtain necessary visas or work permits could delay or prevent its fulfilment of client
projects, which could hamper its growth and cause revenue and/or profits to decline. In the past, it has been subject to penalties in relation
to employment visa violations and have received legal notices alleging violations. While it aims to comply with applicable law and have
established procedures in relation thereto, including in relation to employment visa compliance, given the nature of its business, it cannot be
assured that it will not be subject to such penalties in the future, which could adversely affect the business, financial condition and results of
operations.
Pricing structures do not accurately anticipate the cost and complexity of performing its work: LTILs negotiate pricing terms with its clients
utilising a range of pricing structures and conditions. Depending on the particular contract, it may use time-and-materials pricing, pursuant
to which it typically invoice on a monthly basis for the services that it provides to its clients. It also enters into fixed-price arrangements,
pursuant to which it provides a defined scope of work over a fixed timeline for a capped fee. Its ability to improve or maintain profitability is
dependent on managing the costs successfully. Its pricing structure is highly dependent on internal forecasts and predictions about projects
and the potential demand for its projects and services by its clients, which might be based on limited data and could be inaccurate. Any
increased or unexpected costs, or wide fluctuations compared to its original estimates or delays, or unexpected risks it encounter in

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connection with the performance of this work, including those caused by factors outside of its control, could make these contracts less
profitable or unprofitable, which could adversely impact the profit margin.
Revenues depend to a large extent on a limited number of clients: LTIL currently derives a significant portion of its revenue from a limited
number of corporate clients. The loss of a major client or a significant reduction in the services performed for a major client could result in a
significant reduction of its revenue. Significant pricing or margin pressure exerted by large clients would also adversely affect the business,
financial condition and results of operations. Further, its client agreements do not provide for any minimum purchase requirements from
major clients while a given client may view its profit margins as high and demand a reduction in pricing terms. These factors may not be
predictable or under its control. If it is to lose one of its major clients or have a significantly lower volume of business from them, its revenue
and profitability could be reduced. It cannot be assured that large clients will not terminate their arrangements with it or significantly
change, reduce or delay the amount of services ordered fromit , any of which would reduce its revenues.
Wage increases in India may diminish competitive advantage against companies located in the United States and Europe and may reduce
the profit margins: LTILs wage costs in India have historically been lower than wage costs in the United States and Europe for comparably
skilled employees, and this has been one of its competitive advantages. However, wage increases in India may prevent it from sustaining this
competitive advantage and may negatively affect its profit margins. Furthermore, increases in the proportion of employees with less
experience, or sources of talent from other low cost locations could also negatively affect the profits.
Any inability to manage growth could disrupt the business and reduce profitability: Business has grown over the years as has the number
of employees that it employs. It expects such growth to continue and that it will place significant demands on its management team and
other resources. This will require it to continue to develop and improve its administrative, operational, financial, systems and other internal
controls. Moreover, the costs involved in entering and establishing ourselves in new and emerging markets, and expanding such operations,
may be higher than expected and it may face significant competition in these regions. It may also face additional risks in setting up
operations in new and emerging markets in which it has no prior operating history or have no experience of conducting business. Its inability
to manage expansion and related growth in these new and emerging markets or regions may have an adverse effect on the business, results
of operations and financial condition
LTIL may face difficulties in providing end-to-end business solutions for clients: As LTIL has increased the breadth of its service offerings, it
has engaged in larger and more complex projects with its clients. This requires it to establish closer relationships with its clients, develop a
thorough understanding of their operations, and take higher commercial risks in contracts with such clients, including penalty clauses in its
agreements and larger upfront investments. Ability to establish such relationships will depend on a number of factors, including the
proficiency of its IT professionals and management personnel. Its inability to provide services at contractually-agreed service levels or
inability to prevent violation or misuse of the intellectual property of its clients or that of third parties could cause significant damage to its
reputation and adversely affect its business, financial condition and results of operations. Additionally, all of its contracts with major clients
are governed by foreign laws. Consequently, it may incur higher costs of litigation in relation to such contracts. Further, it may incur
additional costs in remedying any deficient service that it may provide (if any).
If it is unable to collect dues and receivables from, or invoice unbilled services to, its clients, its results of operations and cash flows could
be adversely affected: LTILs business depends on its ability to successfully obtain payment from the clients of the amounts they owe it for
work performed. It evaluate the financial condition of its clients and usually bill and collect on relatively short cycles. Macroeconomic
conditions, such as a potential credit crisis in the global financial system, could also result in financial difficulties for its clients, including
limited access to the credit markets, insolvency or bankruptcy. Such conditions could cause clients to delay payment, request modifications
of their payment terms, or default on their payment obligations to it , all of which could increase its receivables. If it is unable to meet its
contractual obligations, it might experience delays in the collection of, or be unable to collect, its client balances, and if this occurs, its results
of operations and cash flows could be adversely affected. In addition, if its experience delays in billing and collection for its services, its cash
flows could be adversely affected.
If there is a change in tax regulations, its tax liabilities may increase and thus adversely affect its financial position and results of
operations: Taxes and other levies imposed by the central or state governments in India that affect LTILs industry include customs duties,
excise duties, value added tax, income tax, service tax and other taxes, duties, surcharges and cess introduced from time to time. The central
and state tax scheme in India is extensive and subject to change from time to time. Any adverse changes in any of the taxes levied by the
central or state governments may adversely affect its competitive position and profitability. Currently, it claims certain tax benefits under
the Income Tax Act, relating to various business activities, which decrease its overall effective tax rates. There can be no assurance that
these tax incentives will continue to be available to it in the future. The non-availability of these tax incentives could adversely affect its
financial condition and results of operations.

RETAIL RESEARCH

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RETAIL RESEARCH
Global operations expose LTIL to numerous and sometimes conflicting legal and regulatory requirements, and violation of these
regulations could harm business: Since LTIL provides services to clients throughout the world, it is subject to numerous, and sometimes
conflicting, legal requirements on matters as diverse as import/export controls, content requirements, trade restrictions, the environment
(including electronic waste), tariffs, taxation, sanctions, government affairs, anti-corruption, whistle blowing, internal and disclosure control
obligations, data protection and privacy and labour relations and certain regulatory requirements that are specific to its clients industries.
Due to the varying degree of development of the legal systems of the countries in which it operates, local laws might be insufficient to
defend it and preserve its rights. It could also be subject to risks to its reputation and regulatory action on account of any unethical acts by
any of its employees, partners or other related individuals. Its failure to comply with applicable regulatory requirements could have a
material adverse effect on its business, financial condition and results of operations.
Currency exchange rate fluctuations may have a material adverse effect on the value of the Equity Shares, independent of its results of
operations: The exchange rate between the Rupee and the USD and other foreign currencies has changed considerably in recent years and
may fluctuate substantially in the future. Fluctuations in the exchange rate between the Rupee and other currencies may affect the value of
a non-resident investors investment in the Equity Shares. In addition, its market valuation could be seriously harmed by the devaluation of
the Rupee, if United States or other non-resident investors analyze its value based on the USD equivalent of its financial condition and
results of operations.

Profit &Loss:
Particulars
Revenue from Operations
Other Income
Total Income
Total Expenditure
Employee benefits expense
Other expenses
Sales, administration and other expenses
PBIDT
Interest
PBDT
Depreciation
Amortisation of intangible assets
PBT
Tax (incl. DT & FBT)
Tax
Deferred Tax
Profit from discontinued operations before tax
Tax expense for discontinued operations
Reported Profit After Tax
Minority Interest
Extraordinary Item (Net of tax)
Net profit after tax beforerestatement adjustments
Amortisation of goodwill
Amortisation of cost of long- term projects
Goodwill written off
Net profit before extraordinary item
Extraordinary item (net of tax) as restated
Net profit after tax
EPS (Rs.)
Equity
Face Value
OPM (%)
PATM (%)

RETAIL RESEARCH

Rs in million

FY16
58470.6
2959.6
61430.2
48114.5
35346.6
6710.8
6057.1
13315.8
103.6
13212.2
736.7
1002.9
11472.7
2249.6
1649.2
600.4
0.0
0.0
9223.1
1.3
0.0
9221.8
0.0
0.0
0.0
9221.8
0.0
9221.8
54.3
169.8
1.0
17.7
15.8

FY15
49780.4
915.0
50695.4
39735.8
29242.7
4885.6
5607.4
10959.6
104.2
10855.4
741.6
837.9
9276.0
1667.9
1630.5
35.8
9.7
1.7
7608.1
1.9
79.1
7685.3
0.0
6.4
0.0
7612.5
79.1
7691.6
47.7
161.3
1.0
20.2
15.5

FY14
49205.0
-833.2
48371.8
37732.2
27581.6
4891.5
5259.1
10639.7
305.3
10334.3
589.0
710.7
9034.6
2072.1
1681.0
261.9
493.2
129.3
6962.4
0.8
3002.4
9964.1
-85.1
9.5
-605.1
6886.1
2397.3
9283.5
61.8
161.3
1.0
23.3
18.9

FY13
38514.4
221.0
38735.4
29809.5
22485.9
2920.0
4403.6
8926.0
208.1
8717.8
508.9
722.8
7486.2
1869.5
1631.0
47.0
707.8
191.5
5616.6
0.6
0.0
5616.1
137.1
-15.9
0.0
5737.3
0.0
5737.3
34.8
161.3
1.0
22.6
14.9

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RETAIL RESEARCH
Balance Sheet:

Rs in million

Particulars
Equity & Liabilities
Shareholders Funds
Share Capital
Reserves and surplus
Minority Interest
Non-Current Liabilities
Long-term borrowings
Deferred tax liabilities
Other long-term liabilities
Long-term provisions
Current Liabilities
Short-term borrowings
Current Maturities of long term borrowings
Trade payables
Other current liabilities
Short term provisions
Total Equity & Liabilities

FY16

FY15

FY14

FY13

20226.8
169.8
20057.0
5.2
2581.1
0.0
1206.3
1250.5
124.3
11757.0
397.5
147.2
3276.4
2765.0
5170.9
34570.1

20263.5
161.3
20102.2
3.9
1019.0
138.9
238.0
538.4
103.7
9294.8
1897.5
138.9
2719.5
1723.5
2815.4
30581.1

16102.9
161.3
15941.7
2.0
1540.3
266.3
413.9
729.1
131.1
9361.2
700.7
133.1
2414.8
3735.9
2376.6
27006.4

13388.0
161.3
13226.7
1.2
1920.3
361.9
207.2
1256.9
94.3
8346.1
1853.9
120.6
2065.2
2520.3
1786.0
23655.6

Assets
Non-Current Assets
Tangible assets
Intangible assets
Capital work in progress
Intangible assets under development
Deferred tax assets
Long-term loans and advances
Current Assets
Current Investments
Trade receivables
Unbilled revenue
Cash and bank balances
Short-term loans and advances
Total Assets

10822.0
2791.9
3583.2
7.0
188.4
2.4
4249.1
23748.1
429.2
11659.9
3787.9
2033.7
5837.5
34570.1

9536.2
2749.8
4084.5
53.3
198.5
10.3
2439.8
21044.9
1035.5
10901.2
1544.5
2009.2
5554.5
30581.1

9591.7
2794.7
3693.1
94.4
472.7
1.9
2534.8
17414.7
1687.8
9309.9
1194.2
1589.1
3633.8
27006.4

10404.9
2449.9
4540.8
483.2
940.3
59.1
1931.6
13250.6
486.6
7410.5
1333.5
1193.7
2826.3
23655.6

Business Verticals
Business Verticals
Banking and Financial Services
Insurance
Energy and Process
Consumer Packaged Goods, Retail and Pharmaceuticals
Hi-Tech and Consumer Electronics
Automotive and Aerospace
Media and Entertainment
Others*
Total

RETAIL RESEARCH

Percentage of revenue from continuing operations

2016
2015
2014
26.30%
27.10%
26.00%
20.70%
20.00%
18.80%
12.70%
16.20%
22.00%
9.30%
9.30%
8.40%
5.20%
6.90%
7.40%
6.80%
5.70%
4.20%
6.20%
5.40%
4.60%
12.80%
9.40%
8.60%
100.00%
100.00%
100.00%

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RETAIL RESEARCH
Service Lines
Service Lines
Application Development, Maintenance and Outsourcing
Enterprise solutions
Infrastructure Management Services
Testing
Digital Solutions
Platform-Based Solutions
Total

Percentage of revenue from continuing operations

2016
2015
2014
42.40%
43.40%
43.00%
23.70%
24.80%
27.50%
9.70%
8.70%
8.00%
9.80%
9.50%
8.50%
11.10%
9.50%
7.50%
3.30%
4.10%
5.50%
100.00%
100.00%
100.00%

RETAIL RESEARCH Fax: (022) 30753435 Corporate Office

HDFC Securities Limited, I Think Techno Campus, Bulding B, Alpha, Office Floor 8, Near Kanjurmarg Station Opp. Crompton Greaves, Kanjurmarg (East),
Mumbai 400 042 Fax: (022) 30753435 Website: www.hdfcsec.com
Disclaimer: This document has been prepared by HDFC Securities Limited and is meant for sole use by the recipient and not for circulation. This document is
not to be reported or copied or made available to others. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. The
information contained herein is from sources believed reliable. We do not represent that it is accurate or complete and it should not be relied upon as such.
We may have from time to time positions or options on, and buy and sell securities referred to herein. We may from time to time solicit from, or perform
investment banking, or other services for, any company mentioned in this document. This report is intended for Retail Clients only and not for any other
category of clients, including, but not limited to, Institutional Clients. HDFC Securities Ltd. Is a SEBI Registered Research Analyst having registration no.
INH000002475."

RETAIL RESEARCH

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