Mid-tier IT firm, LTIMindtree, expects performance in Q4 to be similar to Q3, as it sees no changes in the macro environment in terms of decision-making cycles and discretionary spending control, said Nachiket Deshpande, COO, LTIMindtree. 

The company’s scrip on the bourses dived by over 10 per cent in trading hours, after it missed market expectations, as it recorded 16.8 per cent y-o-y rise in profits at ₹1,169 core, which was sequentially flat. “The third quarter revenue performance was affected by broader and deeper furloughs than anticipated, as it saw furlough even in industries that typically do not have them. Further, there was a higher pass-through revenue, impacting margin performance. Some furloughs are spreading into the first two weeks of January as well, and are expected to return gradually. But the one-time pass through in Q3 won’t be carried to Q4,” Deshpande told businessline. 

Nachiket Deshpande, COO, LTIMindtree. 

Nachiket Deshpande, COO, LTIMindtree. 

‘Customers cautious’

The company, which had earlier had expected macro conditions to bottom out in Q3, is now seeing that the expected recovery in Q4 not happening, as macro conditions have remained the same. “Our customers are being cautious in their budget setting. Typically customers would have locked in the budgets by now, but they are looking at taking it quarter by quarter, hence we do not have clear visibility,” Deshpande said. 

LTIMindtree’s deal wins stood at $1.5 billion in the third quarter, and the company notes that the deal ramp-ups are on expected track, although some start dates have stretched in Q3. Deshpande noted that the revenue momentum of the ramp-ups will reflect in the fourth and subsequent first quarter. Further, the majority of deals mentioned are focused on cost-saving and vendor consolidation. 

Increasing headcount

In Q4, the company expects to increase its employee headcount as it aims to relax utilisation rate, and proactively building the bench. The company does not set a specific headcount target for each quarter but will adjust based on the business outlook.

LTIMindtree’s margins for the quarter stood at 15.4 per cent, down 60 bps (q-o-q). It also noted that the timeline to get to its aspiration margin level of 17-18 per cent will be pushed by a few quarters. Deshpande said that this decision allows them to invest back into the business, particularly in building bench strength to support upcoming deals and ensure timely execution. This involves hiring and training to handle increased workloads. Secondly, the company will  continue to invest in enhancing their Gen AI capabilities, focusing on platforms, training, and upskilling. 

comment COMMENT NOW