LTIMindtree: New year, new plan – but will it work?

Mint

24-04-2025

For LTIMindtree Ltd, FY25 was a challenging year. Delayed deal execution and client-specific challenges were a drag on revenues in the second half of the year.
But things are set to improve in FY26, backed by CEO-designate Venugopal Lambu's three strategic initiatives. These are improving overall sales effectiveness and addressing client expectations; revamping large deal strategy to focus on multi-service, multi-delivery, and multi-geography models; and driving agility by optimising costs.
New initiatives are expected to yield results from Q1FY26. The management expects Q1 to be a growth quarter with sequential margin improvement. In Q4FY25, sequential constant currency (CC) revenue slid 0.6% due to a sharp decline in the healthcare vertical, below consensus estimate of 0.3% growth. Ebit margin was flat sequentially at 13.8% as headwinds from employee costs were offset by lower other expenses.
Simply put, the new plan aims to maximize revenues and improve profitability. But a turbulent global backdrop may complicate the expected progress. Note that LTIMindtree fetches a large part of revenue from North America, where growth may be hit by reduced discretionary IT spending and slower contract renewals amid tariff-led ambiguity.
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'We believe the new management has their task cut out, and the added macro uncertainty pushes back the prospect of a double-digit growth rate as well as normalized Ebit margins beyond FY27," said Motilal Oswal Financial Service report on 23 April. Further, the management has not provided a tighter guidance range or timeline, which makes the margin expansion trajectory a tad vague, added the report.
True, order inflows provide growth visibility for FY26 to some extent. Order inflow in FY25 was robust at $6 billion, this was driven by a shift from discretionary projects to long-term, efficiency-focused deals. Q4FY25 alone saw new orders worth $1.6 billion, marking a second consecutive quarter of above $1.5 billion.
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Some large deals are in the pipeline in the retail segment which LTIMindtree expects to close in Q1FY26. The management is optimistic about the order book in FY26 being higher than FY25. Still, the problem is that akin to previous quarters, deals into revenue conversion could be slow due to macroeconomic uncertainties. Plus, clients would remain focused on cost savings, vendor consolidation, and AI-led modernization.
LTIMindtree's shares have declined 4% in the past one year and trade at a FY26 price-to-earnings multiple of 26x, a premium to tier-1 peers. This valuation limits upside potential unless the new strategy gives impressive results.
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