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AI Monetisation Improves; Randstad Adds Upside Optionality:

LTM delivered a mixed Q2FY27, with 1.1% QoQ CC revenue growth and a 10 bps QoQ improvement in EBIT margin to 15.6%. Order inflows of USD 1.3 Bn remained healthy, although the mix is increasingly inclined towards shorter-tenure, faster-conversion AI engagements. The management commentary is constructive on the demand outlook, highlighting a healthy pipeline and growing client spend on AI deployment; Enterprise and Business AI revenue grew 47% YoY, accounting 13.4% for revenue. The management expects H2FY27 to outperform H1FY27, with full-year growth approaching FY26 levels, while maintaining organic margin broadly in line with FY26 numbers. We see this as a gradual improvement in growth visibility rather than a sharp recovery, given softer traditional services and lower-duration deal mix. Randstad acquisition, expected to close by endQ3FY27, offers incremental European growth optionality, but integration and revenue conversion remain key.

We assign an ‘ADD’ rating with an unchanged TP of INR 4,550, valuing LTM at 18x average FY28–29E EPS. At current valuation, the risk-reward remains reasonable, but a sustained re-rating will require stronger revenue conversion and a recovery in deal momentum

Revenue in Line; PAT missed on account of Higher FX Loss

* LTM reported Q2FY27 revenue at USD 1,235.2 Mn, up 1.0% QoQ and 4.7% YoY (vs CIE estimate of USD 1,242.5 Mn). CC growth came in at 1.1% QoQ and 5.1% YoY. The INR revenue for Q2FY27 stood at INR 1,18,076 Mn, up 1.7% QoQ and 13.6% YoY (vs CIE estimate of INR 1,18,657 Mn)

* EBIT for the quarter came in at INR 18,381 Mn, up 2.2% QoQ and 11.5% YoY (vs CIE estimate of INR 18,628 Mn). Operating (EBIT) Margin for the quarter came in at 15.6%, a 7 bps QoQ growth and down 29 bps YoY (vs CIE estimate of 15.7%)

* PAT for the quarter came in at INR 13,780 Mn, down 6.0% QoQ an estimate of INR 15,270 Mn) primarily on account of high FX loss

Strong Order Inflows and H2 Growth Outlook; Execution Remains Key:

LTM reported order inflows of USD 1.3 Bn, supported by a strategic shift towards shorter-tenure, fasterconversion AI deals across Enterprise, Business, Industrial and Marketing AI, alongside Blueworks. Wins spanned wealth management, infrastructure modernisation, IT consolidation and AI-led process automation. Vertical wise, Financial Services grew 3.1% QoQ in CC terms, returning to YoY growth (+0.4%), while Production rose 3.7% and Consumer 0.3%; Tech & Services declined 4.0% due to seasonal renewals and Middle East JV headwinds. The management expects a stronger sequential growth in H2FY27, supported by deal conversion and the planned Randstad digital business acquisition across Europe and Australia, with FY27 growth targeted near FY26 level and EBIT margin around 15.6%. Sustained acceleration will depend on faster deal conversion, successful integration, stabilisation in the Middle East and broader enterprise AI adoption. We remain cautiously constructive on LTM, with H2 growth acceleration supported by deal conversion and AI-led opportunities; however, Middle East headwinds and execution of the Randstad acquisition remain key monitorables.

Margin Remains Resilient at 15.6%; Randstad Integration and AI-led Productivity Key to Upside:

LTM’s Q2FY27 EBIT margin expanded 10 bps QoQ to 15.6%, driven by operational efficiency, 86.4% utilisation and premium pricing on AI-native offering, partly offset by productivity-led deflation and Middle East headwinds. The management expects margin to remain resilient in H2FY27, led by a stronger revenue growth, a rising AI revenue share (13.4%) and Blueworks-led productivity gains, while maintaining margin around current level after the Randstad acquisition. We expect margin to remain near 15.6% in FY27, with sustained expansion dependent on successful integration, timely synergy realisation, stable utilisation and faster conversion of short-tenure AI deals.

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