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Expand Europe presence via domain led acquisition

LTM announced to acquire Randstad’s Technology & Consulting Services business in Europe & Australia for EUR 160 mn (~USD 180 mn), implying valuation of ~0.34x CY25 revenue of EUR 469 mn (~USD 500 mn). While the acquisition valuation appears attractive, the acquired business has witnessed revenue decline at a 12.2% CAGR during CY23–25 amid macro weakness in Europe and client rationalization. Management indicated that the rationalization exercise is largely completed, with the top 25 clients in Europe contributing ~65% of revenue and the top 10 clients in Australia contributing ~80%. However, looking at the vertical dynamics, Manufacturing seems to have higher concentration mix and that too Europe dominated, scrutinizing growth profile within marquee accounts. Near-term profitability impact remains a key monitorable given the onsite-heavy delivery mix and post integration S&M fuelling, although management highlighted that the acquired entity’s onsite gross margins are superior to LTM’s onsite margins, limiting near-term earnings dilution. At this stage, we await greater clarity on client revenue trends and profitability before incorporating the acquisition into our estimates and hence maintain our FY27E/FY28E estimates along with HOLD rating and unchanged TP of INR 4,560.

The acquisition is strategically aligned with LTM’s five-year plan of strengthening its Europe presence (15% of FY26 rev. mix), scaling white-space capabilities across Aerospace & Defence, Automotive, Utilities and BFS (regional banks), and enhancing sovereign AI, cybersecurity and IoT capabilities. The acquired entity derives ~78% of its revenue from Europe and provides access to ~2.9k delivery employees, nearshore centers in Romania & Portugal, and access to marquee clients in regulated industries where LTM previously had limited exposure. Additionally, LTM has signed a five-year AI-led transformation engagement worth ~USD 50–60 mn for Randstad’s India GCC alongside a strategic talent MSP partnership, which could aid in reducing subcontractor costs (6.2% of rev. in FY26).

Acquisition:

LTM announced the acquisition of Randstad’s Technology & Consulting Services business across Europe and Australia for an enterprise value of up to EUR 160 mn, implying ~0.34x CY25 sales of EUR 469 mn. The acquired entities provide IT services and technology solutions across Aerospace & Defence, Automotive, Utilities and BFS verticals, with operations spanning France, Germany, Belgium, Luxembourg, Portugal, Romania and Australia

Rationale of acquisition:

The acquisition strengthens LTM’s presence in Europe and Australia while diversifying its revenue mix beyond the US market. Post acquisition, Europe revenue is expected to scale to ~USD 1.1 bn while Australia would become a ~USD 100 mn+ market for LTM. The deal adds ~2.9k nearshore and onshore employees, delivery centers in Romania & Portugal, and strengthens cybersecurity, IoT and sovereign AI capabilities alongside marquee client relationships in regulated industries, while also creating meaningful cross-sell and up-sell opportunities.

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