LTIMindTree cautious on growth outlook after Q1 earnings

Information technology services major LTIMindTree, which is a recent entrant to Nifty50, is taking a cautious growth outlook after the company posted lower than expected earnings for the June quarter. The sixth largest Indian IT services company posted a net profit of Rs 1,152.3 crore in the first quarter of FY24, up 3.4% sequentially, marking a 4% increase from Rs 1,106 crore a year ago.

At the same time, Q1 revenue rose 14% year-over-year to Rs 8,702 crore, but stayed flat sequentially. Both topline and bottomline missed analyst estimates of Rs 8,751 crore and Rs 1,209 crore. Following this, the company has declined to give guidance for FY24, as revenue growth in Q2 is difficult to predict at a time when delayed decision making and hiring freezes are hindering revenue conversion, chief operating officer Nachiket Deshpande told DH.

“The aspiration continues to remain that we will be in the double digit growth in the year but it is largely driven by the decision making delays that we are seeing, which are continuing to be elongated in most markets,” he said. “We do see challenges in being able to meet that aspect equation,” he added.

The verticals that fared best for the IT company include BFSI, high tech media and entertainment and manufacturing and resources. The lag came from retail CPG (consumer packaged goods) as it is the “sector which is maximum impacted by inflation around the world,” as per the COO, who added that it will continue to face some challenges going forward.

The merger between L&T Infotech (LTI) and Mindtree last November has been a contributing factor for the higher earnings posted this quarter, the exec said, as it aided the merged entity to deploy higher operational efficiencies.

“The biggest contributing factor for us has been that we are able to deploy our combined bench in a much better manner as our systems came together and we got visibility to the talent available across the organisation that has resulted in improved utilisation. That's why you see a 30 basis point improvement at EBIT level from the previous quarter,” Deshpande said.

The company also cracked 19 new deals in Q1 FY24, and hopes to witness increased logo activity in segments like life sciences and healthcare, where it sees untapped market potential, along with retail consumer goods and BFSI.

While the dominance of North America, which makes up 73% of LTIMindTree’s order book, is not expected to change in the short term, the IT services firm sees headroom for growth in Europe, along with emerging markets like the Middle East, Australia, New Zealand and India.