| L&T Technology Services Limited | ||||||
| Ratings reaffirmed at 'Crisil AAA/Stable/Crisil A1+' | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings has reaffirmed its ‘Crisil AAA/Stable/Crisil A1+’ ratings on the bank facilities of L&T Technology Services Limited (LTTS).
The ratings continue to reflect LTTS’s strong business risk profile supported by its established market position and diversified product offerings across various end-user industries. In the first nine months of fiscal 2025, operating income grew by 8% year-on-year to Rs 7,687 crore against previous corresponding fiscal. Revenue growth was supported by broad-based growth across segments, mainly in sustainability and tech in Q3FY25. The company acquired Intelliswift Inc. in January 2025 for a cash consideration of USD 110 million. Revenues of Intelliswift Inc. is USD 100 million (~Rs 870 crore) which will benefit the revenue growth in the fourth quarter this fiscal year besides the organic growth. The niche presence in value-added segments and focus on emerging areas such as medical devices, process engineering, and industrial automation along with acquisitions will aid annual growth in revenue of nearly 10% in fiscal 2025. Crisil Ratings expects the operating income growth to remain in mid-single to low double-digit growth over the near to medium term. During the first nine months of fiscal 2025, operating margins moderated to 18.4% as compared to 19.9% in the previous corresponding period due to higher operating leverage. We expect the operating margins for the full year to remain slightly impacted amid acquisition and related integration expenses.
LTTS continued to remain net debt free with a cash surplus of Rs 3,290 crore as of December 2024. The company continues to maintain a strong financial risk profile, and robust liquidity, which too are expected to continue over the medium term with continuing strong cash accruals, limited maintenance capex and dividend payments.
The ratings continue to factor in benefit from the strong managerial and operational support from its parent, Larsen & Toubro Ltd (L&T, rated Crisil AAA/Stable/Crisil A1+), and the overall strength of the L&T brand. These strengths are partially offset by its geographical concentration in its revenue profile and increasing competition in the business. |
Analytical Approach For arriving at the ratings of LTTS, Crisil Ratings has factored in support expected from its parent, L&T, considering the strategic importance of LTTS to L&T. The parent, L&T with its strong reputation in the engineering and construction industry also finds congruence in LTTS’ products and service offerings. Crisil Ratings has combined the business and financial risk profile of LTTS and its subsidiaries.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
On account of the 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.
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.
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.
The IT and technology services business has been becoming more critical to the L&T group in recent years. The group is presently focusing more on the services business, which includes financial, and IT and technology services, which are asset light, have healthy growth potential, and offer high return on capital employed. L&T has taken significant steps to consolidate and strengthen its services business including the amalgamation of Mindtree Ltd (Mindtree) with Larsen and Toubro Infotech Limited to form LTIMindtree (‘Crisil AAA/Stable/Crisil A1+’). Over the years, the contribution of service-based businesses towards the group’s overall business, both in terms of revenue and profitability has also been improving.
Weaknesses:
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 |
Liquidity: Superior We expect the company to generate a cash accrual of Rs 1,200-1,300 crore over the medium term, which will be sufficient to fund the annual capex and incremental working capital needs. The fund-based bank limits have nil utilisation, and the non-fund-based limits had an avg utilisation of 54% during the last twelve months ended February-2025. Moreover, the cash and liquid surplus stood at Rs 3,290 crore as on Dec’24. Dividend payments is expected to begin accretion with generation of accruals. There is no long-term financial debt, except for financial lease liabilities of Rs 644 crore on LTTS balance sheet as on Sep’24. |
Outlook: Stable Crisil Ratings believes LTTS’s business risk profile will be supported by healthy growth in engineering and research & development (R&D)-related information technology (IT) services, and its financial risk profile will remain comfortable in the absence of debt-funded capital expenditure (capex). Crisil Ratings also believes LTTS will continue to receive managerial and technical support in case of any exigencies from L&T.
ESG Profile Crisil Ratings believes that LTTS ’s Environment, Social, and Governance (ESG) profile supports its already strong credit risk profile.
The IT sector has a low impact on the environment because of the inherent nature of digital services, core operations as well as products. The sector has a social impact because of its large workforce. LTTS has continuously focused on mitigating its environmental and social impact.
Key ESG highlights:
There is growing importance of ESG among investors and lenders. LTTS ’s commitment to ESG principles will play a key role in enhancing stakeholder confidence, given its high share of market borrowings in its overall debt and access to both domestic and foreign capital markets. |
Rating sensitivity factors Downward Factors
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About the Company LTTS is an engineering services provider incorporated in 2012, focused on offering innovative design and development solutions across the product development value chain, for industries such as industrial products, transportation, aerospace, telecommunications (telecom) and the process industry. As on December 21, 2024, L&T held 73.6% of LTTS.
The company was created by combining two strategic business units: Product Engineering Service (PES) from LTIMindtree (‘Crisil AAA/Stable/Crisil A1+’, erstwhile L&T Infotech Ltd) and Integrated engineering services (IES) from L&T, which were transferred to it on January 1, 2014, and April 1, 2014, respectively. |
Key Financial Indicators
Crisil Ratings’ adjusted figures |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
* Fund Based – Cash Credit / Packing Credit (does not include term loan) |
Annexure - List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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