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BENGALURU - Indian IT services provider LTIMindtree reported a 4.7% drop in third-quarter profit on Friday, as rising costs took the sheen off the company's first-ever earnings report.

LTIMindtree, formed when the merger of Larsen & Toubro's IT unit with Mindtree closed in November 2022, said net profit fell to 10.01 billion rupees ($123.4 million) in the quarter ended Dec. 31, from 10.05 billion rupees a year earlier.

Its revenue from operations rose 25.3% to 86.2 billion rupees.

But that was more than offset by a roughly 32% jump in direct costs and an about 37% increase in selling, general and admin costs in the quarter.

Of that, sub-contracting and employee costs, accounting for nearly 83% of the total expenses, grew by 32.1%.

That dragged the Mumbai-based company's earnings before interest and taxes (EBIT) margins down to 13.9% from 18.5%.

Large Indian IT service providers have reported a mixed bag of earnings so far as the pandemic-driven boom is slowly being replaced by tighter client spending due to growing fears of a recession.

Market leader Tata Consultancy Services Ltd missed profit estimates and flagged challenges in Europe, while No.2 Infosys Ltd beat profit estimates and raised its annual revenue outlook helped by a strong deal pipeline.

LTIMindtree, which intends to compete with the market leaders, said its order book expanded to $1.25 billion in the quarter. ($1 = 81.1300 Indian rupees)