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LTIM Q4FY25 performance misses estimates

* Revenue for Q4FY25 came at INR 97.7Bn up 9.9% YoY and 1.1% QoQ (vs consensus est. at INR 98.7Bn).

* EBIT for Q4FY25 came at INR 13.4Bn, up 2.8% YoY and 1.2% QoQ (vs consensus est. at INR 14.2Bn). EBIT margin was down 95bps YoY and flat QoQ to 13.8% (vs consensus est. at 14.4%).

* PAT for Q4FY25 stood at INR 11.2Bn, up 2.6% YoY and 4.0% QoQ (vs consensus est. at INR 11.8Bn).

LTIM secures USD 6Bn TCV in FY25 amid strategic shift to long-term deals:

LTIM reported strong order inflow in FY25, totalling USD 6Bn, a 6.1% YoY increase, driven by a shift from discretionary projects to long-term, efficiency-focused deals. Q4FY25 alone saw USD 1.6Bn in new orders, the second consecutive quarter above USD 1.5Bn. Management is in promising talks with major retail clients, with updates on strategic deals anticipated soon. Some deals expected in Q4FY25 shifted to Q1FY26, boosting confidence in near-term growth. The order book for FY26 is projected to surpass FY25 however; we anticipate that macroeconomic uncertainties from Q4FY25 are expected to continue into Q1FY26 where deals into revenue conversion will remain a challenge and clients will be focused on cost savings, vendor consolidation, and AI-led modernization. Sector-wise, manufacturing is expected to remain stable, while retail shows potential despite muted discretionary spending

Gradual EBIT margin gains expected from improvement initiatives: 

LTIM reported FY25 EBIT margins at 14.5%, down 120bps YoY partially due to wage hikes. However, Q4FY25 margins held steady at 13.8% despite lower revenue, driven by operational efficiencies. To address margin pressures, LTIM launched the “Fit for Future” program, focusing on agility, profitability, and cost optimization. Leveraging AI, the initiative aims to rebalance manpower costs, boost workforce productivity, and enhance operational control. We expect these steps to gradually improve margins through FY26, with steady Q4FY25 performance indicating early success in cost containment. AI-led efficiencies are also projected to enable non-linear headcount growth versus revenue, signalling a shift in operational strategy. Attrition remained stable at 14.4%.

View and Valuation:

LTIM performance presents a mixed outlook. While it secured strong TCV deals in the last two quarters, these gains haven’t yet translated into revenue growth. Margins have weakened over the past 6–8 quarters due to SG&A investments and wage hikes. However, margin improvement efforts are underway. With 75% of revenue from North America, growth may be impacted by reduced IT spending and delayed contract renewals amid evolving tariff policies. As a result, we lower our estimates by 3–6%, revise our rating to ‘REDUCE’, and cut the target price to INR 4,680, implying a PE multiple of 25x (maintained) on FY27E EPS of INR 187.2.

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