LTIM - LTIMindtree Limited Share Price

In the earnings call, management provided a cautious outlook for FY'26, building on the performance seen in FY'25, which registered a constant currency revenue growth of 5% for the year, totaling US$4.5 billion. The CEO, Debashis Chatterjee, noted that while the year had witnessed robust order inflow with Q4 totaling US$1.6 billion, macroeconomic uncertainties had impacted momentum in the second half. They expect the order inflow for FY'25 to stand at US$6 billion, a 6.1% increase year-on-year.

Venu Lambu, CEO Designate, emphasized three key initiatives aimed at driving growth: Sales Transformation, Go-to-Market Strategy, and the "Fit4Future" program. Lambu indicated that the Sales Transformation initiative aims to streamline the service line sales structure and strengthen high-potential business leadership while fostering innovative solutions in the AI-driven environment. The Fit4Future initiative targets operational efficiency and agility, focusing on cost rebaselining and leveraging AI to optimize business processes.

Management aims for improvements in operating margins, which stood at 14.5% for FY'25, down 120 basis points from the previous year, signifying a target to enhance profitability in a challenging macro environment. They project better revenue visibility in Q1 FY'26 driven by a strong order pipeline and ongoing conversations with clients regarding technological modernization.

In terms of expectations, Lambu conveyed optimism about performance in Q1, supported by favorable positioning in large deals, with an emphasis that the company sees opportunities in cost-saving and vendor consolidation for clients navigating the current economic landscape.

1. Question: "Would you say that these changes have already been in place, especially with respect to people? Or you think that it is something that will take some time to play out?"

   Answer: I believe our organizational structure is finalized, and we're strengthening existing frameworks rather than starting from scratch. Some initiatives are already underway, now unified under the Fit4Future program. My focus is on enhancing effectiveness, so I anticipate quick wins from both sales transformation and operational improvements.

2. Question: "Should we expect the productivity benefit pass-on phase to be over with respect to our Hi-Tech clients, and how do we view the banking client?"

   Answer: Yes, the productivity pass-on for the Hi-Tech client has concluded, which opens up opportunities for new capabilities and growth. Regarding the banking sector, while I can't comment on specifics, I remain confident in our ability to capitalize on increased opportunities across our client base without immediate risks.

3. Question: "Would you say that the macro uncertainty has had an impact in March and continuing into April?"

   Answer: The macro uncertainty present in Q4 persists into Q1, but this motivates clients to seek cost-saving measures. There's increased demand for vendor consolidation and technology modernization, which positions us to meet clients' evolving needs effectively.

4. Question: "What areas do you think need immediate attention after your time away from LTIMindtree?"

   Answer: It's hard for me to analyze broadly, as I was away just a month post-merger. However, overall market conditions have shifted drastically. Internally, the organization remains strong, with high talent levels and a passionate team committed to growth.

5. Question: "What linkage should we draw between growth expectations and headcount going forward?"

   Answer: The recent reduction in headcount reflects adjustments made following aggressive recruitment in prior quarters. As AI productivity starts showing effects, expect headcount growth to be less linear relative to revenue growth, allowing for adapting our workforce more strategically.

6. Question: "What is your outlook on revenue growth for FY'26 considering the order book and overarching uncertainties?"

   Answer: While I can't provide a specific percentage, I can assure that our order book is looking stronger than last year. We foresee opportunities from large retail sector deals, which should enhance our growth momentum.

7. Question: "Can you discuss the margin decline you've seen over the past few quarters and its causes?"

   Answer: The decline is primarily attributable to wage hikes implemented in Q3, which continued into Q4. We maintained margins through operational efficiency initiatives. Our focus on pyramid correction and span of control will contribute to future margin improvements, starting in Q1.

8. Question: "What factors may jeopardize or delay the transformation strategy you've laid out?"

   Answer: My transformation strategy focuses on internal capabilities like cost reduction and enhancing sales. While demand outlook is an external variable, our Fit4Future and sales transformation programs are designed to elevate our performance independently from macroeconomic uncertainties.

9. Question: "Is there a strategy to ensure LTIMindtree's growth can at least match or lead peer growth?"

   Answer: For now, I prefer to focus on one or two quarters at a time rather than make long-term predictions. However, I am confident in our plans for growth in Q1 and improvements in margins, aiming for sustained growth moving forward as clarity improves.