Innovation can't be like Brownian motion: Ashish Khushu, CTO, LTTS

Over the last two years, Ashish Khushu, chief technology officer, LTTS, has calibrated the company’s innovation programmes to align them to its growth priorities Image: Selvaprakash Lakshmanan for Forbes India

L&T Technology Services (LTTS), away from the spotlight trained on its sibling LTIMindtree, has quietly emerged as a billion-dollar revenue company, if you consider its Q3FY23 numbers and growth rate.

LTTS, which is also the company’s stock ticker in Mumbai, offers deep expertise in engineering design, and research and development services to some of the world’s biggest and best-known companies—think Airbus, BMW Group and Qualcomm.

“We are in many ways the manifestation of a lot of engineering work in the software and embedded space that L&T used to do in different units,” says Ashish Khushu, chief technology officer.

When the Indian industrial engineering giant pulled together all those different teams, LTTS was born in 2009 as L&T Integrated Engineering Services. The company’s name was changed to L&T Technology Services in 2013, and it was listed in Mumbai in September 2016.

With $248 million in revenues for the three months ended December 31, 2022, LTTS is a hop, skip and jump away from hitting $1 billion in annual revenues. The company employs close to 22,000 people, specialising in areas, including 5G and connectivity, digital manufacturing, cybersecurity, industrial AI, engineering as a service and workplace safety—the company’s six big bets.

LTTS isn’t, of course, immune to the ongoing global slowdown. With respect to Q3FY23 growth of 14 percent in constant currency over the same period a year earlier, “This is the slowest growth in a Q3 since Q3FY17,” Nitin Padmanabhan, an analyst in Mumbai with the UK’s Investec Bank, wrote to clients in a note on January 23.

“Growth during the quarter was impacted by higher-than-anticipated furloughs and lower working days,” the analyst, who has a Sell rating on the stock, wrote. In the coming quarters, however, he expected LTTS to face fewer “headwinds” and growth to pick up in segments, including transportation, plant engineering, medical devices and industrial products and telecom and hi-tech.

In January, analysts at Australian multinational financial services company Macquarie released a new framework that they used to analyse the prospects of eight of India’s mid-cap IT services companies. They ranked LTTS at number 2, and wrote that the company “scores very well, indicating that its growth drivers are sustainable”.

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They also pointed out that among the Indian mid-caps they analysed, LTTS was “unique in its service portfolio that consists entirely of engineering services”. The Macquarie analysts have an “Outperform” rating on the stock.

LTTS shared that ranking with larger sibling LTIMindtree, and was ranked higher than both LTI and Mindtree (each ranked 7) as standalone companies, on this list. Persistent Systems topped the list.

In the last 12-18 months, LTTS has been “co-innovating with a leading Tier 1 automotive company, engineering the next generation of digital cockpit for them”, Khushu says. This is an area where the company’s sustained investments are now paying off big time, he says.

For other customers, LTTS has built a stackable inverter for electric vehicles (EVs), and an integrated next-generation power train. In the niche area of annotations needed in automotive and industrial design, LTTS has created an AI-enabled annotation tool teaming up with Britain’s Coventry University, which has found commercial use in some of the company’s OEM customers.

In Bengaluru, LTTS has set up a lab along with Mavenir and Nvidia for cutting-edge R&D in 5G wireless. The company is expanding its power electronics capabilities with teams in Bengaluru, Mumbai, Vadodara and Mysuru. And these are all “production programmes”, Khushu says, meaning they are commercial projects shaping customers’ products, not just lab work.

With respect to R&D that is yet to get into production stage, LTTS, with a leading SoC (system-on-chip, in the semiconductor area) company, is “designing and architecting, and then we will jointly implement a software-defined medical product”, Khushu says.

Over the next 18 months, by FY25, CEO and MD Amit Chadha aspires to turn LTTS into a $1.5 billion “revenue-run-rate” company. To that aim, “we are making strategic investments”, he said on January 19, in the company’s Q3 earnings press release.

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In Q3 of FY23, LTTS opened a new centre in Toronto for digital engineering and expanded its operations in Peoria, Illinois, in the US, to offer digital manufacturing and modern electrification solutions, including artificial intelligence, robotics, 3D-vision systems, and connected machines.

On January 12, LTTS announced that it was acquiring Smart World and Communication, a unit of its parent L&T, which complements the engineering services company’s six big bets, Chada said.

Smart World & Communication was founded in 2016 to tap opportunities in areas such as end-to-end communications, city surveillance and intelligent traffic management systems for governments and enterprises. The acquisition added its 700 employees to LTTS, and `1,000 crore in annual revenue.

Earlier on, in April 2022, LTTS said it had won a $100 million electric air mobility contract from Jaunt Air Mobility. As part of the contract, LTTS will open an engineering and R&D centre in Québec Province for Jaunt, an electric aircraft manufacturer to provide engineering services for the Jaunt Journey eVTOL (electric Vertical take-off and landing) air taxi.

“Over the last two years we have calibrated our innovation programmes to align them to the company’s growth priorities,” Khushu says. “This is important, because innovation can’t be like Brownian motion,” he says, referring to the phenomena of the random movement of microscopic particles in a fluid as they bump against the molecules of the fluid.

This year, LTTS also crossed the 1,000-patents milestone. When innovation results in customers actually using the solution, which, in turn, affects the customers’ end-consumers, “it is a fillip to the whole organisation”, he says.