- You may be overlooking a multi‑year earnings catalyst in LTIMindtree.
- Revenue grew 2.4% QoQ on a constant‑currency basis, beating the 2.0% consensus.
- Top‑line momentum is coming from large‑deal ramp‑ups and a new NN win (CBDT) that adds ~80‑90bps FY27.
- Margins held at a Q2‑high despite pass‑throughs, thanks to a fit‑for‑future program and INR depreciation.
- Analysts project 5.4%/8.9%/9.5% YoY revenue growth FY26‑FY28 with margins climbing to 15.9%.
- Valuation: 25x FY28 EPS implies a target of ₹6,000, maintaining a HOLD stance.
You’re probably missing the upside hidden in LTIMindtree’s modest revenue bump.
Why LTIMindtree’s Revenue Growth Beats Expectations
Prabhudas Lilladher’s latest research notes a 2.4% QoQ constant‑currency increase—just above the 2.0% estimate. The lift stems from two sources: the acceleration of marquee contracts in the large‑deal pipeline, and the materialization of pass‑through revenue (costs billed directly to clients). While the overall growth looks modest, the underlying trajectory is asymmetric: the top‑five accounts, which historically drive 30%+ of topline, have already narrowed their decline from –5.2% to –2.9% YoY. The deceleration signals that the company is entering a recovery phase, and the next few quarters should see a normalized run‑rate once these flagship deals settle.
Margin Resilience Amid Pass‑Throughs: What It Means for Investors
Pass‑throughs usually compress operating margins because they represent costs that the firm cannot fully control. Yet LTIMindtree managed to keep its EBITDA margin at a Q2‑high (15.3% FY26E) despite the added expense load. Two forces are at play: a disciplined internal margin program dubbed “fit‑for‑future,” and the depreciation of the Indian rupee, which effectively boosts foreign‑currency earnings when reported in INR. This dual tailwind not only cushions current profitability but also provides a runway for margins to edge higher—projected at 15.6% FY27E and 15.9% FY28E.
Sector Landscape: IT Services, BFSI, and CMT Trends
The broader Indian IT services sector is experiencing a bifurcated recovery. Banking, Financial Services, and Insurance (BFSI) and Communications, Media & Technology (CMT) remain the laggards, with contract renewal cycles lengthening and new‑logo wins slowing. Conversely, large‑scale digital transformation initiatives—particularly in the public sector—are accelerating. LTIMindtree’s recent win with the Central Board of Direct Taxes (CBDT) exemplifies this shift. The deal is expected to contribute an incremental 80‑90 basis points to FY27 revenue, underscoring the importance of “vendor consolidation” strategies where enterprises bundle multiple technology spend under a single partner.
Competitor Contrast: How Tata Consultancy Services and Adani Digital Stack Up
When benchmarking LTIMindtree against peers, two names dominate the conversation: Tata Consultancy Services (TCS) and Adani Digital (ADANIPORTS‑linked digital arm). TCS continues to post double‑digit YoY growth, buoyed by a diversified client base and a stronger presence in cloud-native services. However, its sheer size dilutes the impact of any single deal, making upside less pronounced for momentum traders. Adani Digital, still early‑stage, is chasing growth through aggressive pricing, which pressures margins more than LTIMindtree’s measured approach. LTIMindtree thus occupies a sweet spot—large enough to win marquee contracts, yet nimble enough to capture margin upgrades from currency effects and cost‑control programs.
Historical Parallel: Past Recovery Cycles in Indian IT Firms
History repeats itself in the Indian IT arena. In FY18‑FY20, many firms saw top‑line deceleration after a wave of contract expirations. Those that focused on “vendor consolidation” and re‑engineered delivery models (e.g., Infosys in 2019) rebounded with 8‑10% YoY growth within two years. The pattern suggests that once a company stabilizes its marquee account base, revenue growth accelerates as new pipelines mature. LTIMindtree’s current trajectory mirrors that historic playbook, implying a similar upside potential if execution remains disciplined.
Technical Insight: Decoding CC Growth, Pass‑Throughs, and the Fit‑for‑Future Margin Program
CC Growth (constant‑currency growth) strips out foreign‑exchange noise, offering a pure view of operational performance. A 2.4% QoQ CC increase signals genuine demand, not just a favorable rupee move. Pass‑throughs refer to expenses that are billed back to the client without markup—think travel, hardware, or third‑party software licenses. While they increase revenue, they erode margin unless managed carefully. LTIMindtree’s “fit‑for‑future” initiative focuses on automating delivery, tightening utilization, and renegotiating vendor contracts, thereby offsetting the margin drag from pass‑throughs.
Investor Playbook: Bull vs. Bear Cases
Bull Case: The company sustains its margin improvement trajectory, the CBDT deal rolls out on schedule, and additional vendor‑consolidation wins materialize. Revenue ramps to the upper end of the 9.5% FY28E forecast, pushing EPS growth above 12% YoY. At a 25x FY28E EPS multiple, the stock could trade north of ₹6,500, delivering a ~15% upside from current levels.
Bear Case: A slowdown in large‑deal conversions or a renewed wave of wage hikes erodes the “fit‑for‑future” benefits, forcing margin compression below 15%. If BFSI and CMT remain weak, top‑line growth stalls at sub‑5% YoY, and the valuation model collapses, potentially dragging the share price below ₹4,800.
Given the balanced risk‑reward profile, the analyst maintains a HOLD stance, but investors with a 12‑month horizon should watch for the next quarterly earnings beat as a catalyst for a potential re‑rating.