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View & Valuation:

LTIM guided for a double-digit growth outlook in H2FY26 given the strong TCV of large deals signed in H1, which will go for ramp ups. It has also seen steady improvement in margins due to cost optimization program and productivity gains. Given the improved demand outlook, we have revised our estimates upward and expect Revenue/EBIT/PAT to expand at a CAGR of 11%/16%/18%, respectively, over FY25–FY28E. Thus, we upgrade our rating to ADD on LTIM with a revised target price of INR 5,800 (earlier INR 5,360), based on FY27E/FY28E average EPS of INR 232.3 by maintaining P/E multiple at 25x.

Q2FY26 Performance beats Expectations; Strong Improvement in Margins

* LTIM reported Q2FY26 revenues at USD 1,180.1Mn, up 2.4% QoQ and 4.4% YoY in CC terms (vs CIE est. at USD 1,174 Mn.). INR revenue for Q2FY26 stood at INR 103.9Bn, up 5.6% QoQ and 10.2% YoY

* EBIT for Q2FY26 came at INR 16.5Bn, up 17.2% QoQ (vs CIE est. at INR 15.5Bn). EBIT Margins came in at 15.9%, expands by 160 bps QoQ (vs CIE est. at 15.1%).

* PAT for Q2FY26 came at INR 13.8Bn, up 10.1% QoQ (vs CIE est. at INR 12.9Bn).

Targets Double-Digit Growth in H2FY26; AI Productivity Gains Impacts Large Clients:

Management remains optimistic about achieving double-digit USD revenue growth in H2FY26, supported by robust deal wins, strong execution, and continued operational efficiencies. The Q2FY26 order book TCV stood at USD 1.59Bn, up 22.3% YoY — marking the fourth consecutive quarter with TCV above USD 1.5Bn. Growth in the top-five client bucket was temporarily impacted as the company is passing on AI-driven productivity gains to customers during contract renewals. Management expects growth momentum from these large accounts to resume once this transitory phase normalizes. Q2FY26 also marked the second consecutive quarter of sequential growth across all verticals. The strongest performance came from Healthcare, Life Sciences & Public Services (+10.2% QoQ), followed by Consumer Business (+9.1% QoQ). BFSI (+0.2% QoQ) and Technology, Media & Communication (+0.1% QoQ) reported modest but positive growth. The company reiterated its commitment to achieving its long-term revenue aspiration of USD 10Bn.

Steady Improvement in Margins:

LTIM’s EBIT margin expanded 160 bps QoQ to 15.9%, driven by 80 bps gains from the Fit for Future cost optimization program and the non-recurrence of visa costs. A favorable forex movement contributed an additional 80 bps to the margin expansion. Management remains confident of sustaining margin improvement despite seasonal headwinds such as furloughs, supported by levers including AI-driven productivity gains, pyramid optimization through fresher hiring, and continued cost discipline. The company reported a net headcount addition of 2,558 employees in Q2FY26, including 2,604 freshers, taking the total workforce to 86,447. It also announced that Wage hikes will be implemented in a phased manner over two quarters.

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