Not impacted by banking crisis, BFSI vertical still growing: LTIMindtree MD

We can say that the merger activities were completed in record time, says Debashis Chatterjee the CEO and Managing Director of the firm

Clients prioritising cash preservation and delaying the start of new projects may lead to soft growth in Q1 of FY24 for LTIMindtree. However, it aspires to achieve double-digit revenue growth in financial year 2024, says Debashis Chatterjee, chief executive officer (CEO) and managing director (MD) in an interview with Sourabh Lele. Edited excerpts:

Revenue from operations grew only marginally in Q4. Is there any deferment from the deals signed in previous quarters amid the changing economic environment?

We can call it a delayed start, that's what we have witnessed. There is a delay in decision making, which is causing a delayed start. It is something that happened in Q4 as well. And, I think the impact of some of this delay will be felt in Q1 as well. Last year, around this time, when we were talking about deals, it was mostly transformation deals. This year, we are talking about many cost-takeout deals and these deals typically will have an initial phase of transition. This means it’s a slow start from a revenue standpoint. We are hoping that more of these transitions will start in Q1, which will help us in terms of a good trajectory.

The integration of erstwhile LTI and Mindtree was expected to be completed by March end. What is the current status?

We can say that the merger activities were completed in record time. As of April 1 this year, we are working with one system and one harmonised policy. So, you can say that all the merger activities are behind us. Going forward, we are all on one system, one set of processes and policies. So, that will help us as we go along as one company.

There was a 20 per cent year-on-year (YoY) growth in business from the banking, financial services and insurance (BFSI) vertical despite a banking crisis in the US and Europe. What is the situation with your clients? 

Fortunately, we don’t have huge exposure to regional banks or mortgage banks or the banks which are impacted due to this high-interest rate regime. So, we are not impacted by that. But there is a caution. There is a lot of focus in terms of cost takeout and cash preservation is a big priority for most of our clients across verticals. We also see some freeze in some clients. So, those are the things that we are hoping to ease off as we go along. But overall, enough deal activities are going on. We feel that the freeze is temporary and we should be back to the growth trajectory that we have always enjoyed in BFSI.

Is the cautiousness among your clients limited to the BFSI vertical or are there other industries which have slowed down?

Retail is a little slow. I think the media was kind of slow, but we are also seeing the initial signs of demand picking up. And of course, the public services vertical is more project-based. But apart from that, I think that if you talk about manufacturing, travel, hospitality, consumer goods, and even high tech for that matter, we have a very strong pipeline. There's a lot of deal activity in those areas.

What is the outlook for medium-term revenue growth and margins of LTIMindtree? 

We don’t provide guidance, but all that we can say is that we expect some of the behaviours that we have seen in Q4 to continue in Q1. So, Q1 is essentially going to be soft. But given the deal activity that we have, we aspire to still have double-digit growth for the full year. In the short-to-medium term, which is FY24, we want to get back to our EBIT (earnings before interest and taxes) of 17-18 per cent as we used to operate before the two companies got together. However, over a longer term, we should be able to improve them to almost 200-basis points for the next four-five years.

The company had sent letters for additional assessment to freshers hired last year. Is there a delay in onboarding them?

As we have gone through this Q3 and Q4, we have consciously slowed down the intake of both freshers as well as laterals as we completed the integration. We wanted to first consolidate the systems, look at the skill sets that we have across two benches and the skillsets we needed to focus on, among others. We also looked at the best practices of LTI and Mindtree that we need to embrace.