Thread by @Finstor85

A lot of you requested me to post a thread on #LTTS. I did not find time, neither had motivation to do since it is a complex business to cover via something like Twitter thread or even a newsletter. Here I am posting only some abridged views.

I hold Both #LTI & #LTTS from IPO. I am an ex-LT/LTI so have a bit of sneak peak into company as well. Last 2+ years have been terribly bad for LTTS. Not because they did something wrong, but because of external factors.

ER&D space is a bit different than traditional IT. The revenue realization cycles are longer. Contracts are stickier but hard to come by as well. Unlike IT, ER&D is close to sectoral automation at frontline. IT plays role via software, but ER&D is much close to real automation

Altran used to service majority of the ER&D contracts until recently when CG acquired them. Consulting culture & ER&D culture are hard to come along. Other contracts were dominated by Chinese & HK/Singapore based companies.

Since contracts are for longer duration, they don't come up for renewal frequently. Then China-US trade war aggravated the situation even further & COVID hit the final nail.

This put ER&D sector is deep distress. Projects were put on hold. #LTTS lost a big account as well. Contracts were hard to come back. And it was with everyone. COVID pushed them below the line, on de-growth trajectory.

So the most imp. thing was to come back on track, come back to growth. Management guided already that they will be back on growth track by Q3/Q4 2021. Which indeed happened in Q4. So Q4 result was also good.

Good result does not always mean good number. Sometimes strategic change in stance, decision making etc is also growth. Numbers are just outcomes of these countless growth KPIs. We often fail to see growth in such areas.

From my industry experience & social connects, I knew that many contracts will be up for renewal by Q1 2022 & hence you'd see me talking about this since last 2 yrs or so. And here we are.

#LTTS announced 11 deal wins. 6 are $10mn+, 4 are $25mn+ TCV. This is just a start!

EACV - During distressed time #LTTS built an EV lab last year. This year US & EU have announced nation-wise EV infra scale up & spend. Augurs extremely well for OEMS. #LTTS is positioned already.

1. Out of 4 $25mn+ deals, 2 are in EV/EACV.
2. Aerospace is coming back, digital spend is increasing
3. Transportation growth momentum back
4. Plant Engineering - O&G has picked up again which was the biggest drag so far! FMCG also releasing deals in this segment

The biggest drag segment has been strongest to bounce this Q.
5. Telecom - Strong demand for chip design. Lab as a service drove growth further. 5G investments will help too. 5G network automation to scale up strongly

6. Medical Equipment - Flat Q, but diagnostic products & platform are in strong demand. Company positioned in #MedTech which is a big plus.
7. 54% digital revenues. Digital is a huge theme!

So far all #LTTS has to do was ensure it does not slip too much on de-growth. Come back above the line, get back to growth and then fly. It has been successful to do first two points, and now third remain to be seen in rest of the year.

Do not value ER&D like traditional IT. The segment is very global & complex on contracting. I think worst is behind. Next Q will seal the deal & LTTS will have best time ahead after 2 hard years.

Growth & quality of revenue will grow. See T&M contracts have gone up. That is a single metric of quality of contract. Higher the T&M, better/longer is the contract. Always look at this in ER&D company.

Client profile is maturing & will keep moving into higher level. From $5mn to $10mn to $25mn and higher. TTM revenue does not show this sign. Once FY21 revenue flushes out from TTM, this will be visible strongly & market will appreciate the hard work done

Customers who stopped spend on ER&D are coming back, and coming back stronger with even higher spends. LTTS has 800mn run-rate right now. $16bn is existing spend outsourced to India from global contracts so far. So you can image the future

LTNext has very targeted products in areas of digital for construction companies & given #mindtree strategic positioning, it made sense for them to pick that business & not LTTS.

The segment #LTTS operates in is now staring at huge tailwinds that sector hasn't seen in past 2-3 decades! The software & digital spend is through the roof. We see it in IT results. But ER&D spends are yet to hit the market. LTTS will have the best decade of its life.

Key risks to that visibility of client spend is yet to get clear. The 6 investment areas is how LTTS positioning to these tailwinds. More insights will come through investor day.

But let's not jump too much too soon. This is a turnaround quarter, we need to see how next quarters line up. But my personal view is LTTS' real picture will emerge in next 2-3 years, and it will have a ball!

There are clear tailwinds visible now. Those who have held on to company in bad time will reap max benefits now. ER&D isn't easy to analyze. It isn't about just numbers but what is behind those numbers.

Pl don't argue on numbers. I am not fixated on it. Numbers are only outcomes of right actions. If action is there, I am ready to wait.