Corporate: On The Road Less Taken
The IT business in India is all about enterprise solutions. L&T Technology Services, though, has taken a novel route to compete for software revenues — and expand
At the industrial laboratories of l&t technology Services, engineers work on redesigning an old welding machine into a productivity engine. The engine could save hundreds of dollars in costs for host companies. At another laboratory, engineers recreate a smaller prototype of a smart-grid system, which evaluates power consumption through WiFi systems and transports real-time data to power-grid companies. The system enables the efficient redirection of power where it is most needed.
These laboratories are two of 31 innovation centres, where global engineering companies constantly bring their machinery, their problems and their equipment to L&T Technology Services’ engineers, to refurbish and develop less expensive and efficient solutions. The information technology (IT) business in India is all about enterprise solutions. L&T Technology Services, though, has taken a different route to compete for software revenues — and expand.
When L&T Technology Services is able to completely remodel an old machine with new technology, its customers are able to enhance efficiency — and improve productivity. If a diesel engine is consuming more diesel, pop goes an indicator highlighting the problem that needs rectification. Input costs can then be reduced.
By installing sensors and extracting real-time data, the company is getting manufacturers to upgrade engineering capabilities, obtain greater efficiencies, increase load capacities and reduce turnaround time, all the while prolonging the lives of the machines. Sensors are key to providing such information and the company has been constantly innovating on this front.
At one laboratory, L&T Technology engineers have developed the world’s first dual-screen smartphone, which has a smart e-ink display on its back cover, which enables the phone to function efficiently even when it is low on battery. It’s these little innovations that have helped the company garner as much as 176 patents over the years, most of them jointly. Of these, 37 have been developed internally. In fact, the company has added two patents in just the last quarter.
“We are in the business of providing solutions to all kinds of engineering problems,” says Keshab Panda, chief executive officer and managing director of L&T Technology Services. “And our laboratories are constantly testing new solutions for all problems. We can create 3-D models and simulate testing for all conditions and reduce costs. We can also analyse and figure out where efficiency is dropping, at the various stages of manufacturing.”
The company came into existence in 2009 as L&T Integrated Engineering Services. In 2013, Panda re-branded it as L&T Technology Services, to better reflect the scope of its work. Revenues grew from about $70 million in 2009 to $468 million in the 2016 financial year. In the last three years it recorded a revenue growth of 23 per cent compound annual growth rate (CAGR).
The company initially started off as a branch providing and designing engineering solutions for its parent, L&T. Over time, it began to expand its operations and provide engineering and research services to other companies, too. Over the years, engineering research and services have grown into a full-fledged software business in India.
L&T Technology is now working on a micro-level model, which could efficiently utilise energy in homes and also monitor oxygen levels within a room (known as the Ubiq Weise platform). This uses a “smart” WiFi-connected thermostat designed internally. The platform is also being used by construction and other companies to monitor assets remotely and collect operational data on a near real-time basis.
On another platform, the company has created a ‘smart’-grid that can analyse power consumption at all levels, from production to grid to metre. This enables power-utility companies to provide ‘smart’ grid solutions for ‘smart’ cities and redirect power to areas where it is most needed. The company has also developed a proprietary framework called (i-BEMS (Intelligent Building Energy Management Systems) to make buildings intelligent and smart and get a module ready to be integrated in ‘smart’ cities. This unique framework enables up to 40 per cent savings in energy costs. It also lowers cost of maintenance, while extending the life of assets.
An area the company is hugely focusing on, is Internet of Things (IoT), where real-time data analysis for manufacturing units is able to improve productivity and resource allocation and reduce waste. “Why does one want to move into digital manufacturing?” asks Panda. “Because,” he says, “one wants to improve productivity. At any given time, if one can monitor all the facets of one’s facilities, one adds tremendous value not only to the company, but also to partners.”
L&T Technology Services is working with a top IT product developer to build, transmit and retrieve information on the cloud. It has the ability to design systems for companies that manufacture hand-held devices, such as mobile phones. Among its strategic differentiators, are its innovation laboratories that service multiple verticals. These laboratories help it compete globally and the company has invested sums of money in them.
Customers are now coming in from various verticals. About two years ago, the company’s domain expertise was restricted to six verticals — telecommunications, energy, industrial, transportation and engineering and heavy industry. Over the past two years, L&T Technology has added aerospace, medical devices, consumer electronics and semi-conductors, taking its domain expertise up to ten verticals.
The challenge it now faces is to find more companies that can give it top dollar for its unique skills. Manufacturing and engineering companies require constant innovation in their processes. The laboratories, therefore, account for a huge portion of L&T Technology’s investment costs. “New solutions will always be required in manufacturing and engineering, and research, therefore, it is absolutely necessary. We see it as a very huge opportunity,” says Panda.
The company’s Rs 900-crore initial public offer was oversubscribed 2.5 times in September. Its share price , though, has not moved much since it got listed (see chart: ‘Staying steady’). L&T Technology Services works with 43 of the top hundred global engineering research spenders and 55 per cent of its revenue comes from transportation and industrial. The company’s potential for revenue growth is, therefore, huge.