L&T Targets Over 15% Growth for IT and Engineering Arms

Larsen & Toubro (L&T) is looking to accelerate revenue growth at its two services businesses, LTM and L&T Technology Services (LTTS), to more than 15% annually from the current 10–11%. The company aims to strengthen the scale of its services operations by entering new markets, expanding into new business areas and capitalising on opportunities emerging from Artificial Intelligence (AI).

R Shankar Raman, L&T’s president and whole-time director for finance, said the services businesses need to grow faster to compete effectively in their respective industries. LTM operates in IT Services, while LTTS focuses on engineering services.

Speaking to reporters, Raman said the current growth rate was not sufficient for mid-sized companies. He emphasised that both businesses should target annual revenue growth of more than 15% as L&T seeks to expand the contribution of services to its overall operations.

L&T Seeks Faster Expansion at LTM and LTTS

L&T’s strategy involves scaling up both services businesses by identifying opportunities in new geographical markets and developing additional business segments. Raman said demand for their services is currently stronger in the United States and Europe than in India, making international expansion an important part of the growth strategy.

He also highlighted the difference between growth expectations for large corporations and mid-sized companies. Businesses with quarterly revenue of $5 billion or more can sustain single-digit annual growth because of their already substantial revenue base. Mid-sized companies, however, need higher growth rates to expand their market presence and compete with larger players.

For LTM and LTTS, achieving growth above 15% would require continued business development, access to specialised talent and the ability to respond to changing customer requirements.

AI Disruption Creates Opportunities for Services Businesses

Artificial intelligence is emerging as an important factor in L&T’s plans for its services businesses. Raman said AI-led disruption could reduce the competitive advantages traditionally enjoyed by established industry leaders, creating opportunities for smaller and mid-sized companies to compete more effectively.

When technology changes rapidly, established business models and long-standing market advantages can become less decisive. Companies that can deploy skilled employees and adapt their services to new technologies may gain access to opportunities that were previously concentrated among larger competitors.

Raman described both LTM and LTTS as being relatively less disadvantaged by the current disruption. He said the changing industry environment was helping create a more level playing field, although maintaining momentum would require the companies to continue investing in the right skills and capabilities.

Both businesses have recorded some initial successes in AI-related areas. Raman pointed to improvements in profit margins as one indication of progress, while stressing that the companies must build on these gains rather than treat them as a one-time benefit.

Industry Layoffs Could Help L&T Access Skilled Talent

Another opportunity identified by Raman is the availability of experienced professionals following workforce reductions at technology companies. During the COVID-19 pandemic, several companies expanded their workforces rapidly in anticipation of sustained demand. Some of those businesses are now resizing their operations.

According to Raman, this shift could help LTM and LTTS recruit professionals with specialised technical and domain expertise. Such employees can bring knowledge of particular industries and customer requirements that may otherwise take considerable time for a company to develop internally.

He said L&T was now in a position to access talent becoming available as other companies adjust their workforce levels. For services businesses seeking faster growth, hiring people with the right technical capabilities could support expansion into new projects and markets.

However, access to experienced employees alone will not guarantee higher revenue. The companies will also need to convert their capabilities into new client relationships, projects and recurring business to achieve the targeted growth rate.

L&T Finance Realigns Business Towards Retail Lending

Alongside its technology and engineering services operations, L&T has also been reshaping its financial services business. Raman said the financial services segment has undergone a realignment, with a stronger focus on retail lending and an exit from riskier areas of the business.

The shift indicates an effort to concentrate on lending activities that fit the company’s revised business priorities. Retail lending is now a central focus as L&T Finance seeks to strengthen its operations and manage risk exposure.

Raman also highlighted the role of technology in the financial services business. L&T is deploying technology extensively across its operations, creating a model in which the business increasingly combines financial services with a substantial technology infrastructure.

He said the strong technology backend supports the company’s financial operations and helps improve the way services are delivered. This technology-led approach is intended to support business efficiency as the financial services arm develops its retail lending activities.

Parent Company Support Could Help L&T Finance Improve Margins

L&T Finance also benefits from its association with the larger L&T group, particularly when accessing funds. Raman said the parent company’s backing helps the financial services business secure funding at competitive rates.

Access to competitively priced funds can be important for a lending business because borrowing costs influence the difference between the income earned on loans and the cost of financing them. Lower funding costs can therefore provide support to margins, although the final impact also depends on lending rates, credit quality and operating expenses.

The combination of technology investment, a greater focus on retail lending and access to group-level funding forms part of L&T’s broader approach to its financial services operations.

Growth Execution Remains Key to L&T’s Services Strategy

L&T’s ambition to lift revenue growth at LTM and LTTS above 15% reflects the company’s push to make its services businesses larger contributors to its operations. The target is higher than their current growth rate of 10–11%, placing greater emphasis on market expansion, new business opportunities and the use of emerging technologies.

AI disruption and the availability of skilled professionals could provide support, but converting these opportunities into sustained revenue growth will remain central to the strategy. The stronger demand environment in the US and Europe also makes international market development an important priority.

For L&T, the next phase will involve maintaining profitability while expanding the scale of its IT and engineering services businesses. The company’s ability to turn its technology capabilities and talent access into new contracts will be important in determining whether LTM and LTTS can reach the targeted growth level.