When L&T Infotech (now LTI) went IPO in July 2016, it was the first IPO in several months to open on a discount, compared to its issue price of Rs. 710 per share. That disappointing listing is now long past, and LTI is emerging as a company that has delivered growth at a time the IT industry overall is reeling from global trends and attitudes swinging against outsourcing and in favor of automation/AI.
LTI saw revenue growth for its full FY17 at 10% constant currency, higher than the rest of the industry - earnings CAGR for the company is at 1.5x of Tier-1 IT. LTI also logged a 8%+ growth in BFSI (Banking, Financial Services and Insurance) even as other players struggled to deliver growth in this vertical.
The company's fourth quarter revenues when annualized, will cross $1 bn, as HDFC Securities notes, bringing the firm into the billion dollar club - the sixth IT services company in India to achieve this landmark. It would also make it capable of competing, and winning big deals. The company is seeing loyalty in large accounts, winning more business from top customers despite higher margins than its industry peers, and focusing on digital and platform led growth.
HDFC Securities and Motilal Oswal issued buy calls on LTI based on 1) Lower valuation than its peers 2) "industry leading" return ratios (>50% RoIC) and rising payout ahead (>2.5% dividend yield). The company's growth trajectory looks highly positive according to analysts based on its delivery mix and deepening business in dominant verticals. LTI's share price is currently trending below broker targets.