Larsen & Toubro Infotech Ltd Management Discussions.

Management Discussion & Analysis

I. Global Economic Scenario

Our world is witnessing an unprecedented pandemic that has virtually spread to every country in the world. This has resulted in loss of precious human lives and lockdown measures put in place to contain it are curtailing economic activity, driving up unemployment, and depressing international trade.

I MF in its baseline scenarios is projecting the global economy to contract sharply by -3 percent in CY20, much worse than during the 2008-09 financial crisis. Growth in the advanced economy group—where several economies are experiencing widespread outbreaks and deploying containment measures—is projected at -6.1 percent in 2020. Most economies in the group are forecast to contract this year, including the United States (-5.9 percent). Among emerging market and developing economies, all countries face a health crisis, severe external demand shock, dramatic tightening in global financial conditions, and a plunge in commodity prices, which will have a severe impact on economic activity in commodity exporters.

The risks to baseline macroeconomic forecast is contingent on the virology of the pandemic, duration of the lockdowns, and disruptions to the supply chain. The global business confidence could be severely affected, leading to weaker investment and growth than projected in the baseline.

Source: International Monetary Fund. 2020. World Economic Outlook: The Great Lockdown. Washington, DC, April.

II. Industry Overview

The strong digital foundation that Indian Technology Service Providers have built over the last decade underpinned the remarkable agility and resilience in responding to the COVID-19 crisis; ensuring business continuity for all global clients while prioritizing safety of its professionals.

The Global IT-BPM market excluding hardware and ER&D grew 5.6% over last year and stood at USD 1.5 trillion in CY19. Indian IT-BPM industry revenues including hardware and ER&D spend stood at USD 191 billion in FY20. The industry added ~USD 14 billion in incremental revenues last year, representing year-on-year growth of ~ 7.7% in USD terms. IT-BPM export revenues for the industry for FY20 are expected to reach USD 147 billion, growth of 8.1% over the past year

Share of Digital in industry revenues has jumped from ~20% last year to now in the range of 26%-28%. Nine digital technology areas will emerge as fastest-growing and highest-impacting, with the combined potential to deliver one-third of the USD 100 trillion. The nine areas include three foundational technologies - Big Data and Analytics, Cloud.

Computing, and Cyber security - and six advanced technologies - Artificial Intelligence, Internet of Things, 3D Printing, Robotics, Blockchain, and Immersive Media.

Source: NASSCOM IT-BPM Strategic Review 2020

III. Our Business

LTI (NSE: LTI) is a global technology consulting and digital solutions Company helping more than 420 clients succeed in a converging world. With operations in 32 countries, we go the extra mile for our clients and accelerate their digital transformation with LTIs Mosaic platform enabling their mobile, social, analytics, IoT and cloud journeys. Founded in 1997 as a subsidiary of Larsen & Toubro Limited, our unique heritage gives us unrivaled real-world expertise to solve the most complex challenges of enterprises across all industries. Each day, our team of more than 30,000 LTItes enable our clients to improve the effectiveness of their business and technology operations and deliver value to their customers, employees and shareholders.

1. Strategy

Advent of newer and efficient technologies is driving extraordinary changes across different industry verticals all over the world. During these tumultuous shifts, there are early signs of winners who would outgrow their competitors and establish themselves as Breakaway Enterprises. The common thread across these companies is they are fast adopters of technology and are reshaping their organisation at a pace and agility that has not been witnessed in the past.

At LTI, we believe enterprises need to master four essential plays to be a breakaway leader Our go-to-market strategy that we believe shall help enterprises to be a breakaway leader continue to be the same as we had shared with you last year:

• Operate to transform - leveraging automation in everyday operations and solving for the unstated needs

• Data driven Organization - harnessing the power of analytics

• Experience Transformation for their customers and employees

• Digitize the Core by leveraging our real world know how of the clients industry domain

We are continuously working towards strengthening the solve along these four plays by investing in people and sharpening our capabilities. Our programmatic capability building focuses on hiring and re-skilling employees in digital technologies, developing vertical centric platforms, augmenting key partnerships and acquiring unique capabilities.

Partnerships:

In FY20, LTI further strengthened its partnership and alliances ecosystem. LTI received the AWS SAP Competency partner certification, positioning LTI in an exclusive list of AWS global partners. Elevation of LTI to "Gold" partnership with Pega and "Premier" partnership with MuleSoft showcase our resolve to remain relevant to our clients.

Acquisitions:

To further augment its digital capabilities, LTI announced two acquisitions in FY20. In July 2019, it acquired Lymbyc, a specialist in AI, machine learning and advanced analytics. The Lymbyc acquisition adds to LTIs Mosaic platform offering. In October 2019, it acquired Powerup, a born-in-cloud company, with cloud consulting capabilities across all three leading cloud platforms - AWS, Microsoft Azure and Google Cloud. In addition to cloud consulting capabilities, Powerup also adds 2 AI products to LTIs powerful suite of offerings.

xFH - LTI Design for Thriving in the WFH Future

For the foreseeable future, WFH is the new global norm. As with any competitive landscape, some organizations will find ways to adapt and thrive under a fully distributed model, while others will unfortunately flounder

Thats what the xFH model is all about: helping organizations make sense of their own WFH model, understand the layers that comprise it, then drive meaningful and impactful interventions at each of those layers—and across all layers to ensure optimal business outcomes.

At LTI, we broke down WFH in five layers, each with a specific set of interventions, tools, governance & outcomes - these layers traverse foundational needs to team & individual needs.

Layer 1: Operational from Home (OFH)

The OFH layer encompasses all that goes into giving each employee the devices and equipment they need to work from home in a safe, healthy, and productive way. Enabling employees at the OFH layer will ask questions of both your IT infrastructure, as well as your business continuity planning (BCP).

Layer 2: Secured from Home (SFH)

At LTI, ensuring people have the right connectivity is hygiene. But this has gone beyond providing secure infrastructure for business email, intra-corporate chat, video conferencing capabilities, and WiFi support for connected devices. Weve had to assess our broader security posture to make sure that the connectivity solution we first implemented in response to COVID-19 is hardened to ensure enterprise security in the long-term "new normal"—to ensure that security awareness and acceptable use policy is a well-established baseline for all our WFH employees.

Layer 3: Engaged from Home (EFH)

How do we design toward the active engagement of a remote workforce, one thats sitting in thousands of different locations at once—people who havent met with each other in person for a month or longer?

At LTI, this is what we focused on the most right after initial enablement. Along with technology enablers like Microsoft Teams and Workplace, it needed us to adopt new practices on how we interact with our teams and colleagues. Different teams at LTI came up with innovative ideas - daily standups, virtual coffee or drink sessions, ‘We care moments, 5X5X5 initiative - connecting with 5 new team members at 5 pm, 5 days a week. These have now become integral part of LTIs Ways of Working.

Layer 4: Productive from Home (PFH)

LTI teams kept majority of our contractual commitments and they kept important go-live dates on track and executed flawlessly, working entirely remotely. In the past month, we have numerous examples where we have witnessed higher productivity working from home.

We have not only managed our contractual commitments, kept important go-live dates on track and executed flawlessly in our ongoing projects. Even so, our teams have also evolved our platforms and methodologies to carry out upstream processes like solutioning, requirements workshops, service transitions completely remotely, with very little loss in productivity.

Layer 5: Growing from Home (GFH)

Finally, its at the Growing from home (GFH) layer that our teams find the opportunities for professional development and, where appropriate, turn those opportunities into growth for the organization. This layer is about personal growth, about finding ways to continue the journey of professional transformation. At LTI, sates, marketing, support, services, and other teams are all engaged at the GFH layer

In summary, we have demonstrated agility and nimbLeness to adapt to the challenges posed by COVID-19. This combined with our strategy to help our customers become a Breakaway Enterprise is making us standout in the marketplace.

2. Opportunities

a) Banking and Financial Services: LTI delivered 6.1% year-on-year revenue growth in this vertical. We see faster adoption of advanced data analytics and AI based strategies in Banking industry as customer data segmentation and enhanced decision support become key priorities. Covid-19 has the potentiat to change the way people bank forever marking a clear shift towards digital and cloud. We believe majority of routine operations would move to cloud as cloud-native technologies can enhance customer experience white reducing costs at the same time.

b) Insurance: LTI has achieved 12.2% year-on-year growth in this sector Cost optimization and legacy systems modernization continue to be the key drivers of growth. Many insurers are shifting from product-centric to customer-centric business modet, so they are open to form partnerships with InsurTechs which wiLL help them cut costs and improve business process efficiencies along with providing better customer experience.

c) Manufacturing: LTI delivered 20.0% year-on-year growth in this vertical. This sector includes Industrial Manufacturing & Automotive. The automotive industry has been facing an unprecedented technology and business modeL transformation mainLy driven by Connected, Autonomous, Shared and ELectric mobiLity (CASE). These trends wiLL continue to drive the industry evolution going forward. The industrial manufacturing sector is witnessing the importance of Digital Twin in maintaining operations within the manufacturing ecosystem, and the emerging & expanding roLe of CoLLaborative Robots, Remote Work and the ‘Virtual Shift in manufacturing sectors.

d) Energy and Utilities: LTI has seen strong growth in this sector with 20.3% year-on-year growth. The pandemic outbreak has driven OiL & Gas companies to extensiveLy focus on cost reduction measures due to Lower consumer demand. DigitaL transformation coupLed with cLoud based strategy has emerged as the key focus area to combat the business pressure from pandemic crisis and its after effects. CLoud migration has heLped companies Leverage soLutions for automated adaptive pLanning and scheduLing of production, Logistics and service processes, which in turn wiLL enhance operationaL efficiency by reducing human interventions.

e) CPG, Retail and Pharma: With year-on-year revenue growth of 25.3% in FY20, there was a steady growth momentum in this sector Competition from Direct-to-consumer companies is changing business models for CPG players. Companies are investing in customer-centric digitaL technoLogies Like VirtuaL SheLves, DigitaL Kiosks, SeLf-Checkout, DigitaL reaLity etc. As pharma companies generate huge amount of heaLth data, Linking them to new technoLogies for buiLding digitaL pLatforms is the way forward to transform their businesses. Emerging technoLogies like mHeaLth, Robotic Surgeries, 3D Printings among others are paving their way in the life sciences industry.

f) Hi-Tech, Media and Entertainment: Our strong pedigree in data and anaLytics offerings continue to heLp us win new Logos in this segment. Direct to Consumer is a strong theme emerging from the necessity to understand customer preferences and behavior In Media and Entertainment, content creation and prediction, along with personalization is the key to providing seamless user experience. In Hi-Tech, 5G technology is slated to drive the market for the next several years and also open opportunities in OTT and E-commerce. LTI has achieved 9.8% year-on-year revenue growth in this vertical.

3. Human Capital

LTI crossed the 30,000-employee mark in FY20. Our unwavering focus on engaging, developing and retaining such taLent is part of every peopLe decision we make. The culture of LTI is one of incLusivity and transparency. A gender-incLusive workforce is a naturaL resuLt of this outLook which is deepLy woven into our ways of working. As of March 31, 2020, 31% of our workforce is comprised of women. Our unique recruitment program ‘Revive with LTI provides return to work opportunities to experienced women professionals, who are currently on sabbatical. They will receive on the job training, mentorship from senior leaders and opportunity to work on trending technologies in LTI.

The charter of LTIs Mission Ubuntu - Launched in FY19 - says ‘I am who I am, because of those around me. Continuing our journey of HR transformation through policy intervention and process improvement, weve Launched projects that witt influence all aspects of human capital management from hiring to upskiLLing and attrition control

In the area of talent management and digital skilling, we have launched an Al-based solution that will help us contextualize and speed up hiring, skilling - specifically focused on digital and deployment. It provides accurate ways of matching the right talent with the relevant job at speeds that significantly cut down on sourcing and hiring times. Besides providing a business context based skill map gap analysis for the Company, it also ensures an improved employee as well as candidate experience.

A key goal for the Company in FY20 has been to focus on continuous reduction in attrition. We launched the iLead series to help first time managers develop their leadership skills and help in talent retention.

As a Company, LTI believes in continuous engagement not only with its employees but also the fresh minds and vast talent pool in colleges - something that has the potential to change the face of technology. In FY20, LTI flagged off the ‘Brand Icon initiative - a strategic program designed to engage with selected colleges not just for branding but from a 360-degree-development perspective between academia and corporate. Each college has been associated with an LTI leader to have a focused approach. Student development programs like webinars and workshops were conducted by the LTI industry experts.

Recognition for Our Talent Programs:

Our global sales leadership incubation program, iRise, has won recognition at the ‘2019 Stevie Awards for Great Employers. Currently in its 3rd batch, iRise is a 12-month onboarding program aimed at building global sales leaders of tomorrow.

As talent becomes a key differentiating factor for service providers, the need to build a hyper-productive, multi-skilled and diverse workforce taking a long-term view of reskilling has become critical to win and deliver engagements across next-generation technology areas. In its recent report "Talent Readiness for Next-generation IT Services PEAK Matrix™ Assessment 2020: Closing the Demand-Supply Gap", Everest Group has ranked LTI as the leading service provider for talent readiness for next-generation data services skills on account of focused talent development efforts across the entire data value chain of data storage & management, data gathering, and data analytics.

Response to COVID-19: In response to the public health crisis and its impact on business resulting from the COVID-19 outbreak, LTI has moved swiftly to ensure safety and wellbeing of its employees while also maintaining continuity of operations. We have enabled WFH option for ~99% of our employees. A global helpline and email address have been set up to answer questions about COVID-19 and our response to it. Regular updates and information to employees through emails, intranet and communication channels have been ensured. An internal portal has been set up which acts as the one-stop destination for accurate information and guidelines about COVID-19. HR business partners have communicated best practices to their respective units while also understanding employees challenges in working from home.

IV. Significant Factors Affecting Our Results of Operations

Our results of operations have been, and will be, affected by many factors, some of which are beyond our control. This section sets out certain key factors that our management believes have historically affected our results of operations, or which could affect our results of operations in the future.

Client Relationships

Client relationships are at the core of our business. We have a history of high client retention and continue to derive a significant proportion of our revenue from repeat business built on our successful execution of prior engagements. In the year ended March 31, 2020, we generated 94.3% of our revenue from existing clients as compared to 96.6% in the year March 31, 2019.

As client relationships mature, we seek to maximize our revenue and profitability by expanding the scope of services offered to that client with the objective of winning more business from our clients, particularly in relation to our more substantive and value-added offerings. At the same time, we continue our efforts to add new clients and expand client relationships.

Composition of revenue portfolio

Our export service revenue consists of both onsite and offshore revenue from IT services. The mix of IT services performed onsite and offshore has an impact on our ability to achieve higher profit margins. The following table shows the proportionate contribution from our onsite and offshore service revenue on a consolidated basis for the year ended March 31, 2020 as compared to the year ended March 31, 2019.

Employees and Employee Costs

I n order to compete effectively, our ability to attract and retain qualified employees is critical.

Our total headcount increased to 31,437 as of March 31, 2020 from 28,169 as of March 31, 2019. Our attrition rate for FY20 was 16.5% as against 17.5% in FY19.

Employee benefits expenses constituted 58.1% and 56.1% of our total income in the year ended March 31, 2020 and March 31, 2019 respectively. Wage costs in India, including in the IT services industry, have historically been more competitive than wage costs in the United States, Europe and other developed economies. In addition, we continue to invest in the recruitment and retention of sales and administration staff in line with our growth and expand our markets.

Foreign Currency Fluctuations

Since majority of our revenue is foreign currency denominated, we carry foreign exchange risks on transactions as well as translation. Although our foreign currency expenses partly provide a natural hedge, we are exposed to foreign exchange rate risk in respect of revenue or expenses entered into in a currency where corresponding expenses or revenue are denominated in different currencies. Major currencies in which we have exposures are US Dollars, Euro, Canadian Dollars, Swedish Krone, Australian Dollar, South African Rand and British Pound Sterling. We have put in place an active foreign exchange hedging policy to mitigate the risks arising out of foreign exchange fluctuations.

I n addition, the overall competitiveness of the Indian IT industry in the global market is also significantly dependent on favorable exchange rates.

Tax Benefits for Indian IT companies

We have historically benefited from the direct and indirect tax benefits given by the Government for the export of IT services from SEZs. As a result, considerable portion of our profits is exempt from income tax leading to a lower overall effective tax rate than that which we would have otherwise been subjected to if we were doing business outside SEZs. During the year, additional SEZ exemptions resulting from capacity and business expansion was offset by lower SEZ exemptions for certain units on completion of first five years of SEZ where we get 100% exemption from Income tax as opposed to 50% in next five years. The timeline for companies to set up new SEZ units and get Income tax benefits was March 31, 2020 and any new unit set up after this date will not be eligible for these benefits.

Moreover, the Government had announced reduction of Corporate Tax Rates during the year with condition of foregoing tax benefits. Decision to move to this new tax regime in appropriate year may have bearing on the financials of the company.

Until March 31, 2011, direct and indirect tax benefits were also available to us for the export of IT services from software development centers registered under the STPI Scheme. From April 1, 2011 onwards, only indirect tax benefits are available for our business through software development centers registered under the STPI Scheme.

V. Financial Conditions Consolidated Assets

1. Acquisitions During the Year Ended March 31,2020 Lymbyc

During the year, the group acquired 100% shares in Lymbyc Solutions Private Limited, along-with its identified subsidiary (collectively hereinafter referred as Lymbyc) for an enterprise value of 380 Million which includes upfront consideration and performance based earn-outs. Lymbyc is a specialist Al, machine learning, and advanced analytics company with their proprietary product ‘Leni. The platform has a combination of natural language processing, data visualization and predictive analytics capabilities. The Company has used cut-off date of August 1, 2019 as the acquisition date being date of acquiring effective control. The financial results for the year ended March 31, 2020 include revenue of Rs. 63 Million and profit after tax of 11 Million pertaining to this acquisition.

Powerupcloud

During the year, the group acquired 100% shares in Powerupcloud Technologies Private Limited (hereinafter referred as ‘Powerupcloud) for an enterprise value of USD 15 million which includes upfront consideration and performance based earn-outs. Powerupcloud is an AWS premier Consulting Partner with capabilities in Cloud consulting, migration, cloud native application development and managed services and also specializes in Azure and GCP Cloud Platforms. The Company has used cut-off date of October 1, 2019 as the acquisition date being date of acquiring effective control. The financial results for the year ended March 31, 2020 include revenue of 161 Million and loss after tax of 16 Million pertaining to this acquisition.

2. Tangible and Intangible Assets:

(Rs. Million)
As at March 31,2020 As at March 31,2019
Property, Plant and equipment 4,031 3,052
Right of Use Assets 7,692 -
Capital work-in-progress 382 32
Goodwill 6,368 4,947
Other Intangible assets 1,106 1,300
Intangible assets under development 210 83
Total 19,789 9,414

Property, Plant and Equipment:

LTI continued to invest in expansion of development centers in India as well as overseas and related IT assets and infrastructure facilities to meet business growth. Plant, property and equipment has increased to 4,031 Million as at March 31, 2020 from 3,052 Million as at March 31, 2019 since the net additions are higher than depreciation during the year Increase in Capital work in progress is due to initial expenses incurred on construction of proposed development centre.

Right of Use Assets:

Right of Use assets have been recognized at 7,692 Million as on March 31, 2020 after implementation of IND AS 116 ‘Leases" effective April 1, 2019.These assets are primarily related to Office premises occupied by the group across locations in India and overseas.

Goodwill and Other Intangible Assets:

I ncrease in Goodwill is primarily due to goodwill arising from acquisition of Lymbyc and Powerupcloud. The net decrease in Other Intangible assets during the year is mainly on account of amortization and end of useful lives of certain assets. Intangible assets under development represent efforts spent on assets which are under development.

3. Other Non-Current and Current Assets

(Rs. Million)

As at March 31,2020

As at March 31,2019

Non-current Current Total Non-current Current Total
Non-Current Assets - Financial
Investments 2 - 2 1 - 1
Loans 560 - 560 473 - 473
Other Financial Assets 118 - 118 1,606 - 1,606
680 - 680 2,080 - 2,080
Other Non-current Assets
Tax assets 817 - 817 841 - 841
Other Assets 1,451 - 1,451 1,111 - 1,111
2,268 - 2,268 1,952 - 1,952
Current Assets
Loans - 129 129 - 71 71
Other Financial Assets - 1,613 1,613 - 1,703 1,703
Tax Assets - 7 7 - 37 37
Other Current Assets - 6,562 6,562 - 4,493 4,493
Total 2,948 8,311 11,259 4,032 6,304 10,336

Total Other Non-Current and Current assets stood at 11,259 Million as of March 31,2020 as compared to 1 0,336 Million as of March 31, 2019.

The decrease in non-current other financial assets is mainly attributable to decrease in marked to market gains of outstanding hedges due to rupee depreciation against USD. The decrease in current other financial assets related to marked to market gains on outstanding hedges was offset by increase in deposit placed with banks related to Credit Support Agreements. As required under Ind AS 115 "Revenue from Contracts with Customers", unbilled revenue for fixed price contracts where the contractual right to consideration is dependent on completion of contractual milestones and not unconditional upon passage of time is classified as a non-financial asset. The increase in other current assets is primarily related to such unbilled revenue for fixed price contracts of 4,342 Million included in other current assets as of March 31, 2020 as compared to 3,096 Million as of March 31, 2019.

4. Trade Receivables

Trade receivables amounted to Rs.23,121 Million (net of provision for doubtful debts amounting to Rs.630 Million) as at March 31, 2020, compared to Rs.18,263 Million (net of provision for doubtful debts amounting to Rs.521 Million) as at March 31, 2019. Days of Sales outstanding of Trade Receivables as on March 31, 2020 is 77 days as against 70 days as on March 31, 2019.

5. Unbilled Revenue

Unbilled revenue represents value of services performed for customers not yet billed. Unbilled revenue stood at Rs.4,420 Million as at March 31, 2020 as against Rs.5,582 Million at March 31, 2019.

Days of Sales outstanding of unbilled revenue (including that classified as non-financial assets) has improved to 29 days as on March 31, 2020 as compared to 33 days as on March 31, 2019.

6. Funds Invested

(Rs. Million)
As at March 31,2020 As at March 31,2019
Investments 22,186 17,402
Cash and Cash equivalents 4,853 3,499
Other Bank Balances 399 651
Fund invested 27,438 21,552

The investments in Mutual funds are primarily in Debt mutual funds and in equity arbitrage funds having investments in sound rated instruments & in schemes with large assets under management, thus mitigating counterparty risk. Further, during the year, the Company invested in Corporate Deposits amounting to Rs.1,022 Million. Put together, investments stood at Rs.22,186 Million as at March 31, 2020 as against Rs.17,402 Million as at March 31, 2019.

Cash and cash equivalents include both rupee accounts and foreign currency accounts and deposits with banks. The bank balances in overseas accounts are maintained to meet the expenditure of the overseas operations.

Other Bank Balances are earmarked funds and term deposits, in rupee as well as foreign currency, having maturity of more than 3 months.

7. Share Capital

(Rs. Million)
As at March 31,2020 As at March 31,2019
Authorized:
260,000,000 equity shares of Rs.1 each 260 260
(Previous year 260,000,000 of Rs.1 each)
Issued, paid up and subscribed
174,126,769 equity shares for Rs.1 each 174 174
(Previous year 173,510,084 of Rs.1 each)
Equity Share Capital 174 174

The Issued, paid up and subscribed share capital increased on account of shares allotted on exercise of employee stock options during the year ended March 31, 2020.

8. Other Equity

(Rs. Million)
As at March 31,2020 As at March 31,2019
Other reserves 6,336 10,105
Retained earnings 47,530 38,659
Share application money pending allotment - 0
Non-Controlling interest 11 8
Other Equity 53,877 48,772

Other equity at the end of March 31, 2020 stood at Rs.53,877 Million as against Rs.48,772 Million at the end of at March 31,2019. The decrease in other reserves from Rs.10,105 Million at the end of March 31, 2019 to Rs.6,336 Million at the end of March 31, 2020 is primarily due to decrease in hedging reserve on account of marked to market losses on outstanding hedges on account of rupee depreciation against US Dollar The increase in retained earnings from Rs.38,659 Million at the end of March 31, 2019 to Rs.47,530 Million at the end of March 31, 2020 is on account of Net Profit for the year, reduced by dividend paid, offset by adjustment of Rs.640 Million on transition to IND AS 116 ‘Leases.

9. Deferred Tax Assets/Liabilities

(Rs. Million)
As at March 31,2020 As at March 31,2019
Deferred tax assets 2,222 1,545
Deferred tax liabilities 101 56

Deferred tax assets and liabilities are recognized for temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted as on the balance sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Other deferred tax assets are recognized and carried forward to the extent there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

Deferred tax assets have increased to Rs.2,222 Million as at March 31, 2020 from Rs.1,545 Million as at March 31, 2019 mainly due to creation of deferred tax asset on hedging reserve during the year ended March 31, 2020, offset by utilisation of MAT credit during the year

10. Other Non-Current and Current liabilities

As at March 31,2020

As at March 31,2019

Non-current Current Total Non-current Current Total
Non-Current liabilities
Financial Liabilities 2,884 - 2,884 936 - 936
Lease liabilities 7,571 - 7,571 - - -
Provisions 330 - 330 291 - 291
Current liabilities
Trade Payables - 6,950 6,950 - 4,669 4,669
Other Financial Liabilities - 8,011 8,011 - 6,730 6,730
Lease liabilities - 1,228 1,228 - - -
Other Liabilities - 4,134 4,134 - 2,582 2,582
Provisions - 2,588 2,588 - 2,108 2,108
Current income tax liabilities (Net) - 81 81 - 374 374
Total 10,785 22,992 33,777 1,227 16,463 17,690

Total Other Non-Current and Current liabilities stood at Rs.33,777 Million as of March 31, 2020 as compared to Rs.17,690 Million as of March 31, 2019.

Non-current Financial Liabilities and Current Other financial liabilities as of March 31, 2020 include contingent consideration payable for acquisitions, marked to market losses on outstanding hedges and employee liabilities towards annual incentives.

Other current liabilities comprise of unearned & deferred revenue and statutory dues. Provisions comprise of provisions for employee benefits on account of compensated absences and post-retirement medical benefits.

Due to implementation of IND AS 116 ‘Leases effective April 1, 2019, non-current Lease liabilities of Rs.7,571 Million and current Lease liabilities of Rs.1,228 Million have been recognized as on March 31, 2020.

VI. Results of Our Consolidated Operations

2019-20

2018-19

(Rs. Million) % of Total Income (Rs. Million) % of Total Income
Revenue from operations 108,786 97.1% 94,458 96.9%
Other income 3,292 2.9% 3,023 3.1%
Total Income 112,078 100.0% 97,481 100.0%
Expenses
Employee benefit expenses 65,166 58.1% 54,668 56.1%
Operating expenses 21,506 19.2% 19,573 20.1%
Finance costs 826 0.7% 106 0.1%
Depreciation and Amortization 2,730 2.4% 1,472 1.5%
Other Expenses 1,821 1.6% 1,384 1.4%
Total Expenses 92,049 82.1% 77,203 79.2%
Profit before tax 20,029 17.9% 20,278 20.8%
Tax expenses
- Current tax 3,913 3.5% 4,875 5.0%
- Deferred tax (net) 911 0.8% 248 0.3%
4,824 4.3% 5,123 5.3%
Net Profit for the period 15,205 13.6% 15,155 15.5%
Other Comprehensive income (4,099) 378
Total comprehensive income for the period 11,106 15,533
Profit attributable to:
Owners of the company 15,201 15,159
Non-controlling interests 4 (4)
15,205 15,155
Total comprehensive income attributable to:
Owners of the Company 11,103 15,538
Non-controlling interests 3 (5)
11,106 15,533
Earnings Per Share
Basic 87.45 87.67
Diluted 86.61 86.43

Financial Year 2019-20 Compared to Financial Year 2018-19

1. Income

Our total income comprises of revenue from operations and other income.

Our total income increased by 15.0% to Rs.1 12,078 Million for the year ended March 31, 2020 from Rs.97,481 Million for the year ended March 31, 2019.

Revenue from Operations Revenue Mix by Verticals

Our revenue increased by 15.2% to Rs.108,786 Million for the year ended March 31, 2020 from Rs.94,458 Million for the year ended March 31, 2019, due to growth in CPG, Retail & Pharma (growth of 27.4%), Energy & Utilities (growth of 22.6%), Manufacturing (growth of 22.3%), Insurance (growth of 14.1%), Hi-Tech, Media & Entertainment (growth of 11.7%), Banking and Financial services (growth of 8.4%) and other verticals (growth of 1.6%).

Our service revenue increased due to growth in Enterprise Integration & Mobility (growth of 31.0%); Enterprise Solutions (growth of 23.4%); Analytics, AI & Cognitive (growth of 21.8%), Infrastructure Services & Security (growth of 16.8%); AEG (growth of 5.2%) and Products & Platforms (growth of 1.9%).

2. Other Income

Other income primarily consists of income from foreign exchange gains (or losses), investments in mutual funds, interest received and miscellaneous income. Other income for the year ended March 31, 2020 was Rs.3,292 Million as against Rs.3,023 Million for the year ended March 31, 2019.

Income from Investments

Income from investments increased to Rs.1,217 Million in the year ended March 31, 2020 compared to Rs.990 Million for the year ended March 31, 2019 as a result of increase in investible surplus along with active portfolio management which cushioned fall in returns due to sharp rate cuts & drastic fall in rates this year

Foreign Exchange Gains/(Losses)

In order to mitigate our foreign exchange risk, we have a long-term hedging policy. We hedge exposures in major currencies such as the US dollar and the Euro. Our hedging policy runs on a net exposure basis, typically for a period of up to three years. These hedges provide for payments by banks to us in the situations where the spot exchange rate on maturity is lower than the rate at which hedges were entered and payment by us to the banks in situations where the spot exchange rate on maturity is higher than the rate at which the hedges were entered. Our foreign exchange gain was higher at Rs.1,889 Million for the year ended March 31, 2020 as against Rs.1,785 Million for the year ended March 31, 2019.

3. Expenses

Our expenses include employee benefit expenses, operating expenses, finance costs, depreciation and amortization and other expenses. Our total expenses increased by 19.2% to Rs.92,049 Million for the year ended March 31, 2020 from Rs.77,203 Million for the year ended March 31, 2019.

Employee Benefit Expenses

Employee benefit expenses comprise of salaries (including overseas staff expenses); staff welfare; contributions to provident and other funds; contributions to superannuation funds and contributions to gratuity funds.

Our employee benefit expenses increased by 19.2% to Rs.65,166 Million for the year ended March 31, 2020 from Rs.54,668 Million for the year ended March 31, 2019. The increase in the salaries was majorly due to increase in employee count in line with business growth, changes to employee mix and increments. This has also resulted in higher contribution to the provident fund, social security and payroll taxes.

Operating Expenses

Operating expenses comprise of consultancy charges, cost of equipment, hardware and software packages, travelling and conveyance expenses, repair and maintenance expenses etc.

Our operating expenses increased by 9.9% to Rs.21,506 Million for the year ended March 31, 2019 from Rs.19,573 Million for the year ended March 31, 2019 in line with business growth.

Finance Costs

Finance costs primarily comprise of interest on lease liabilities recognized on adoption of IND AS 116 ‘Leases, interest on contingent consideration payable with respect to acquisitions and interest on deposit received under Credit Support Agreements entered with banks to limit our counter party risk in relation to our hedges.

Our finance costs increased to Rs.826 Million for the year ended March 31, 2020 from Rs.106 Million for the year ended March 31, 2019 primarily due to increase in interest on lease liabilities.

Depreciation and Amortization

Tangible and intangible assets including Right of Use Assets are amortized over periods corresponding to their estimated useful lives.

Our depreciation and amortization expense increase by 85.5% to Rs.2,730 Million for the year ended March 31, 2020 from Rs.1,472 Million for the year ended March 31, 2020, primarily due to amortization of Right to Use Asset recognized on adoption of IND AS 116 ‘Leases.

Other Expenses

Other expenses increased by 31.5% to Rs.1,821 Million for the year ended March 31, 2020 from Rs.1,384 Million for the year ended March 31, 2019. CSR expenses increased to Rs.460 Million for the year ended March 31, 2020 from Rs.224 Million for the year ended March 31, 2019, which includes contribution made by the Company of around Rs.180 Million to PM CARES Fund for COVID-19 relief measures. The contribution towards PM CARES Fund is exceeding CSR obligation for the year ending March 31, 2020 and accordingly, will be offset as part of CSR obligation arising in subsequent years. Legal & professional fees increased to Rs.1,196 Million for the year ended March 31, 2020 from Rs.921 Million for the year ended March 31, 2019.

4. Profit Before Tax

Our profit before tax decreased by 1.2% to Rs.20,029 Million for the year ended March 31, 2020 from Rs.20,278 Million for the year ended March 31, 2019.

5. Tax Expense

Income Tax expense comprises of current tax and deferred tax. Current tax is the amount expected to be paid to the tax authorities in accordance with the applicable tax laws in relevant jurisdictions. Deferred tax assets and liabilities reflect the impact of temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the financial statements as well as other deferred tax assets recognized and carried forward to the extent there is a reasonable certainty that sufficient future taxable income will be available.

Current tax expense has decreased by 19.7% to Rs.3,913 Million for the year ended March 31, 2020 from Rs.4,875 Million for the year ended March 31, 2019 mainly on account of reduction in MAT rate in India from 18.5% to 15%.

Deferred tax expense increased to Rs.911 Million for the year ended March 31, 2020 as against Rs.248 Million for the year ended March 31, 2019 primarily due to utilization of MAT asset during the year

Due to above, our total tax expense has reduced by 5.8% to Rs.4,824 Million for the year ended March 31, 2020 from Rs.5,123 Million for the year ended March 31, 2019.

6. Net Profit After Tax

As a result of the foregoing factors, our net profit increased by 0.3% to Rs.15,205 Million for the year ended March 31, 2020 from Rs.15,155 Million for the year ended March 31, 2019.

7. Earnings Per Share (EPS)

Our Basic EPS has decreased by 0.25% to Rs.87.45 per share for the year ended March 31, 2020 from Rs.87.67 per share for the year ended March 31, 2019. Our Diluted EPS has increased by 0.2% to Rs.86.61 per share for the year ended March 31, 2020 from Rs.86.43 per share in the year ended March 31, 2019.

Segment Results

We have identified Banking, Financial Services & Insurance (BFSI), Manufacturing (MFG), Energy & Utilities (E&U), High-Tech, Media & Entertainment (HIME) and CPG, Retail, Pharma & Others (CRP & Others) as our business segments and accordingly presented its segment results as summarized below.

2019-20

2018-19

(Rs. Million) % of revenue (Rs. Million) % of revenue
Revenue from Operations
Banking, Financial Services & Insurance 49,365 45.4% 44,645 47.3%
Manufacturing 18,275 16.8% 14,963 15.8%
Energy & Utilities 12,396 11.4% 10,112 10.7%
High-Tech, Media & Entertainment 12,166 11.2% 10,921 11.6%
CPG, Retail, Pharma & Others 16,584 15.2% 13,817 14.6%
Total revenue from operations 108,786 100.0% 94,458 100.0%

 

2019-20

2018-19

(Rs. Million) % of revenue (Rs. Million) % of revenue
Segmental Results
Banking, Financial Services & Insurance 10,423 21.1% 11,021 24.7%
Manufacturing 3,449 18.9% 2,696 18.0%
Energy & Utilities 2,187 17.6% 1,897 18.8%
High-Tech, Media & Entertainment 1,462 12.0% 1,290 11.8%
CPG, Retail, Pharma & Others 3,321 20.0% 2,243 16.2%
Total Segment Results 20,842 19.2% 19,147 20.3%

The following tables provides breakup of our revenue on the basis of the geographic location of our clients.

2019-20

2018-19

(Rs. Million) % of revenue (Rs. Million) % of revenue
North America 75,044 69.0% 63,060 66.8%
Europe 17,038 15.7% 16,058 17.0%
India 7,765 7.1% 6,823 7.2%
Asia Pacific 3,044 2.8% 2,577 2.7%
Rest of the world 5,895 5.4% 5,939 6.3%
Total Revenue 108,786 100.0% 94,458 100.0%

VII. Liquidity

LTI has improved its overall cash flow position during the year ended March 31, 2020 and continued to manage liquidity through internal accruals. LTI has financed its business growth as well as acquisition of Lymbyc and Powerupcloud through healthy cash generated from operations during the year

The table below summarizes our consolidated cash flows:

(Rs. Million)
2019-20 2018-19
Net cash generated from operating activities 16,435 13,951
Net cash (used) in Investing activities (6,520) (7,438)
Net cash (used) in financing activities (8,900) (5,943)
Net increase/(decrease) in cash and cash equivalents 1,015 570
Cash and cash equivalents at the beginning of the period 4,150 3,633
Effect of exchange differences on translation of Foreign currency cash and cash equivalents 87 (53)
Cash and cash equivalents at the end of the period 5,252 4,150

The companys long-term rating has been upgraded by CRISIL to AAA/Stable from AA+/Positive during the year

The group has considered the possible effects that may result from the pandemic relating to COVID-19 on the carrying amounts of receivables, unbilled revenues, goodwill, right of use assets and intangible assets. In estimating the possible future uncertainties in the global economic conditions because of this pandemic, the group, as at the date of approval of these financial statements has used internal and external sources of information including credit reports and related information, economic forecasts and consensus estimates from market sources on the expected performance of the Company. The group has performed sensitivity analysis on the assumptions used and based on current estimates expects the carrying amount of these assets will be recovered.

The effect of COVID-19 has not been material on the financials of the group since the situation especially in India worsened only in last two weeks of March20, and we were able to activate BCP action quickly.

VIII. Key Financial Ratios

Ratios 2019-20 2018-19 % Change in Ratio
DSO (Billed) 77 70 9.9%
Current Ratio 1.8 2.1 -15.4%
Operating Profit Margin (%) 16.1% 18.4% * -12.2%
Net Profit Margin (%) 14.0% 16.0% * -12.9%
Return on Net Worth 29.5% 34.6% ** -14.7%

*Higher wage costs due to onsite localization & acquiring niche skill talent has led to drop in Operating & Net Profit Margin for the year ended March 31, 2020.

**Lower margins explained above along with normal cash generation during the year dragged the Return on Net Worth for the year ended March 31, 2020.

Since LTI is debt-free, debt-equity ratio and interest-coverage ratio are not applicable.

IX. Internal Controls

LTI has established a framework for Internal Controls, commensurate with the size and nature of its operations. Process has been set up for periodically apprising the senior management and the Audit Committee of the Board about internal audit observations of the Company with respect to Internal Controls and status of statutory compliances.

Business Heads and Support Function Heads are responsible for establishing effective internal controls within their respective functions. Standard operating procedures and internal control manuals are defined and continuously updated.

The Company has laid down Internal Financial Controls as detailed in the Companies Act, 2013. These have been established across the levels and are designed to ensure compliance to internal control requirements, regulatory compliance and appropriate recording of financial and operational information.

Internal Audit team periodically conducts audits across the Company, which include review of operating effectiveness of internal controls. The Company wherever necessary engages third party consultants for specific audits or reviews. The Audit Committee oversees internal audit function.

X. Outlook, Risks and Concerns

This section lists forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these statements as a result of certain factors. LTI does not undertake to update any forward-looking statement that may be made from time to time by us or on our behalf.

Covid-19: Response by LTI to Sustain Business Operations Seamlessly

The public health crisis resulting from COVID-19 outbreak has impacted lives and businesses world-wide. At LTI, our goal has been to ensure safety and well-being of our employees, while also maintaining continuity of operations across LTI offices and client locations.

Our comprehensive Business Continuity Policy and Crisis Management Standard were activated across all locations world-wide, which guided our efforts in the situation. LTI could ensure minimal disruption of services to its customers which was well appreciated by its clientele.

A cross-functional taskforce with representatives from Business Continuity & Resilience, HR, IT, Facilities, Travel, and Communications teams closely monitored the situation and worked in accordance with the information and guidelines provided by global agencies like the WHO, CDC, NHS, Ministry of Health & Family Welfare of Government of India, as well as advisories from other national, state and local health authorities.

Our Facilities Management Team made sure that all our premises were safe by implementing adequate measures like regular cleaning and sanitization, putting in place screening mechanisms, ensuring first responders are equipped with personal protective equipment, getting our medical centers ready to support emergency situations and so on.

Our Delivery Teams ensured that the Business Continuity Plans were up-to-date and tested. Most of our employees, across the globe, were enabled to work from home within a short span of time. In doing so, LTI took adequate measures to ensure all appropriate security and confidentiality arrangements were in place. Investments in enterprise collaboration technologies like WebEx, MS Teams, Workplace and others helped maintain effective communications. The IT teams were available 24x7 to ensure support for effective work from home.

Regular communication with Clients and Partners was maintained to update them on our preparedness and response.

Our HR Teams constantly engaged with employees, to help them with emotional support and health guidance as needed.

Multiple channels of communication were created to ensure employee outreach. A global helpline as well as email channel was setup to answer queries and concerns around COVID-19. Awareness was spread through a dedicated Intranet page which was created to share latest updates, information and FAQs. An In-house built Crisis Notification System was used to send bulk SMS and email notifications to employees. Workplace Facebook was extensively used to post regular updates and key messages from the Senior Leaders.

Detailed business resumption plans were chalked out and implemented in a phased manner post the lockdown period, as per the guidelines issued by National, State and Local Authorities. LTI adopted suitable prevention and protection measures before our employees could return to office, keeping in mind their well-being. Also, a custom mobile app iCare, was created in-house, for tracking employee safety. Some of the distinct features of the App were as follows:

• It allowed users to fill a Health survey and report any health condition for Self, Family or people staying with them

• The Reporting Managers could view the status of current employees in the team along with the risk they pertain and advise employees to work from home or allow to come to office basis risk analysis

• The interaction feature allowed Contact Tracing for employees in office and helped in taking quick response decisions

• I t provided employees with the latest official updates from LTI on COVID-19 situation

• It also covered local news related to COVID-19, hotspot areas, etc.

AH the controls put together ensured a seamless recommencement of our Operations from offices.

In these unprecedented times, the Senior Leadership team led the way and ensured that the morale of employees remained high throughout, by providing all possible support and encouragement.

Organization Level Risks and Mitigation Approach

Risk Description Mitigation Approach
Experienced employees are in high demand and have vast employment opportunities with the competition. ‘Attrition Control Council defined for oversight on attrition
Attrition to Key Talent: Technical and Leadership Attrition of experienced and talented employee impacts organizational knowledge and relationship Exposure to limited number of clients create risk of a major revenue loss in the event a major client exit ‘Mission Ubuntu launched to drive employee engagement Performance Management System framework designed to reward High potential employees
Several initiatives to help employees learn and grow at LTI Focused efforts to expand existing business and add new logos:
Client Focused strategies on winning new clients with large IT spends
Concentration Innovations and value-added deliverables to become trusted partner to clients
Expand business in Europe, Middle East and South Africa
Data Privacy, GDPR Non-Compliance to GDPR requirements and similar other regulations attract huge penalty Post M&A, organization runs the risk from factors like Synergy, Structure, People etc. which can impact envisaged business goal Formed GDPR compliance team and steering committee
Experts to perform current state assessment, and resolutions of gaps
Management of M&A integration - HR, Sales, Delivery, IT, F&A etc.
Post M&A Integration Organization structure redefinition
Governance mechanism to realize stipulated performance targets
International Non- compliance to Local vs expats ratio in various countries where LTI is doing business All hiring/deputations in various counties to be cleared by People Supply Chain Head wherever a local vs expat ratio is to be maintained
Localization Create a process for localization of resources in various countries
International Mobility Misrepresentation in relevant documentation may lead to investigation by the adjudicating agencies leading to loss of business or account Enhanced system to enable account managers to upload the documents
Zero tolerance on misuse or non-accountability of usage
Digital Disruption Rapid change in digital market needs fast realignment to new technologies, failure to which may impact business growth Technology Architecture group created to ensure continuous alignment of skill development efforts with market needs Creation of practices to serve end-to-end Digital needs
Change in political conditions can affect business in that country Diversify presence across geographies
Target varied sections of business
Geo-Political Risk Geo-political Risk in starting business in new Geography Establish a process to evaluate risks of starting a business in new country
Regular monitoring of risks in countries where LTI has current business portfolio
Non-compliance to comprehensive governance may lead to delivery issues Institutionalize Escalation Risk reviews process at Account/Delivery Unit/Organization Level
Execution Define framework to capture Stakeholder mapping & Quarterly Business Reviews
Transformation Non availability of transformation framework for accounts may lead to unstructured transformation assignments Define Transformation playbook to enable structured account transformation
6 Pilot accounts identified with transformation needs
Litigation risk can arise from commercial disputes, perceived violation of intellectual property rights, mergers and acquisitions, immigration and employment matters etc. The Company has a robust framework for dealing with litigation matters appropriately. The in-house Legal Function reviews critical legal positions of the Company. Services of external global law firms, taxation and compliance experts are sought wherever required.
This risk is inherent to doing business across various countries. Litigation can be lengthy, expensive, disruptive and can attract negative media attention. • The Company continues to strengthen internal processes and controls to ensure adequate compliance with all regulatory matters, contractual obligations, information security and protection of intellectual property.
Litigation Risks Litigation could also have a negative impact on the Companys ability to pursue strategic projects, joint ventures and other forms of cooperation. • Where possible, legal risks are limited by using standardized general contracts. The in-house legal team support the business operations and thereby help limit risks.
Litigation leading to adverse ruling could result in monetary damages or injunctive reliefs that could affect the business, in addition to reputation loss. • A group-wide D&O Liability insurance policy as well as entity level D&O policy are in place that covers among others, the business management bodies of the Company and its subsidiaries across globe. Besides, the contracts with customers are appropriately insured to counter any adverse exposure on account of litigation

During the year the U.S. Department of Justice and U.S. Immigration and Customs Enforcement have initiated an investigation of the Company related to its use of U.S. non-immigrant visas for its employees. There is no formal charge filed in the matter as on date. The Company has conveyed to the Department its willingness to cooperate in the matter

Enterprises today are facing an expanding base of demanding born-digital consumers, disruptive new entrants and intensified competition from digital-savvy competitors. LTI has made proactive investments in digital technologies, bringing our in-house expertise together under the MOSAIC platform and enhancing these offerings through alliances and acquisitions.

FY2020 marks the fourth consecutive year of industry leading double digit growth from LTI in constant currency terms. The risks emanating from global pandemic continue to evolve. Even so, our sustained investments in capabilities has helped us pro-grammatically build a resilient and sustainable business model. Based on the strength of our client relationships, value propositions to our customers and our ability to innovate we expect to continue delivering industry leading growth performance in times to come.

Enterprise Risk Management

Objective

LTIs Risk Management Framework has robust policy and processes that ensure proactive identification of risks to business objectives and its timely assessment and effective mitigation.

ERM - Governance Structure

The key roles and responsibilities for Risk Governance bodies are described below.

Board of Directors

• Ensure Risk Management Framework and Policy is in place

• Monitor the implementation of Enterprise Risk Management (ERM) Framework

Risk Management Committee (RMC): Review effectiveness of Risk Management Policy and ERM Framework. Review Strategic, Macro-economic and Sectoral Risks for the organization

Risk Operating Committee (ROC): ROC comprises of organization leadership and is chaired by the Chief Operating Officer Key responsibilities of ROC include:

• Guide and mitigate issues faced by respective business/functions pertaining to risks they face

• Develop proactive and sustainable Risk Management culture

Chief Risk Officer (CRO): CRO heads the Risk Management function and co-ordinates with organization leadership. Key Responsibilities include:

• Design and Deploy ERM Plan in co-ordination with ROC

• Convene RMC meeting providing updates on ERM deployment

• Provide ERM updates to Audit Committee

Head - Risk Management: CRO appoints the Head - Risk Management of the Company. The Head- Risk Management shall:

• Act as Nodal point for coordinating risk management activities for the organization

• Ensures execution of Risk Management Policy for the organization

Risk Champion: Each Function/Unit shall identify a Risk Champion. Key responsibilities include:

• Champion the required ERM activities within the respective function/unit in coordination with central ERM team

• Works closely with the Unit Head/Leadership to identify risks and its mitigation for the respective Unit

• Ensure reviews and monitoring happens at regular intervals for the risks for the respective Unit

Risk Management Assurance:

• Internal Audit Services of LTI reviews adherence to the Policy and Processes as part of Risk Management Assurance (RMA). The Audit Committee and Risk Management Committee is updated on RMA.

Risk Management Framework

Risk Management Framework at LTI is depicted in the diagram below:

Multiple Lines of Defense

Risk Assurance Level
1st Line 2nd Line 3rd Line Risk Assurance Stakeholders Areas of Risk Managment
Project Security Internal Audit Organization CEO, COO, CFO President Sales CHRO, CIO CRO M&A, Client Concentration, Sustainability, Service portfolio, Competition, Attrition, Geopolitical, Branding
Account Quality External Audit BEU BEU Head Risk Champion Location Heads Compliance, Internal Controls, Client Satisfaction, Timely Facilitation, Multiple stakeholders, Co-ordination, Mobility
DU/PU Compliance External Consultants DU/PU DU/PU Head Business Growth, Competition, Sustainability,
BEU Risk Sales Head Risk Champion Profit Margins, Employee Satisfaction, Fulfillment, Niche skills
M Management anagement Contro ls Account KAM KDM Account growth, Client Satisfaction, Rate revision, Timely invoicing, Receivables, Contract Commitment
Inte rnal Control Measu res Project PM, DM Estimation, Technology, Requirements stability, Quality Deliverables, Knowledge management, Business continuity

A. Risk Management through Multiple Lines of Defense

1. First Line of Defense: It is the self-risk assessment by teams performing the job. This is the risk assessment by employees at ground. As the actual risk would be best known to the person who perform the tasks, first line of defense is very crucial for the organization.

2. Second Line of Defense: These are the checks and defense conducted by various compliance teams internal to the organization. Teams like Internal Audit, Delivery Excellence, IT Security etc. performs internal checks ensuring required internal controls are in place.

3. Third Line of Defense: These are the checks performed by various external teams. Various external consultants and auditors are leveraged to receive best practices and industry benchmarks. These best practices are implemented in the organization to improve the operations with effective controls to ultimately minimize the associated risks.

B. Risk Management at Various Levels

The risks are identified at various levels of the organization namely Project, Account, Unit and Organization level. The perspective of risks varies with the stakeholders who identifies the risk. Hence it becomes imperative to identify risks at various levels of organization.

1. Organization Level Risks: Organization level risks are identified and mitigated by the Senior Management of the organization. These risks have an oversight by CXOs and Risk Management Committee at regular intervals.

2. Business Enabling Unit Risks: These are the risks posed to the functions that enable the business of the organization. These risks are identified and mitigated by the respective Business Enabling Unit Head, Respective Risk Champion and Senior Management of the function. These have a governance and oversight on a monthly basis.

3. Business Unit Risks: These risks are posed to the Business Units and are identified by respective Business Unit Head in co-ordination with Risk Champion and Senior Management of the Unit. They have a monthly Governance and oversight by respective Unit Head.

4. Account Level Risks: Account level risk are identified by Key Account Manager and Key Delivery Manger for respective accounts. They are monitored on regular frequency and have an oversight by respective Unit Head in Senior Management Review meetings.

5. Project Level Risks: Project level risks are identified by Project Managers, Delivery Managers and Account Managers of respective projects. They are reviewed in regular governance forums. Projects that are high on risks and needs immediate attention of senior management are discussed in ‘Escalation Risk Review meetings. Depending on the severity of risks, these risks get escalated to Account/Delivery Unit/Organization level Escalation Risk Review meetings. They also are audited by Organization Delivery Excellence team.

Risk Management Process

Risk Management process in LTI comprises of Risk Identification, Analysis, Mitigation and Monitoring. Risk Severity is derived based on probability of occurrence and impact, on a scale of ‘High, ‘Medium and ‘Low. Regular reviews focus on monitoring effectiveness of risk mitigation and to identify new risks, if any.