All digital transformation deals on track: LTIMindtree CEO Debashis Chatterjee

LTIMindtree has won a greater number of cost saving-based deals but has not seen any transformation or revenue maximization-based deals being cancelled so far amid the challenging macro environment, its chief executive said.

On Friday, the L&T Group firm reported its combined quarterly results after the L&T Infotech and Mindtree merger in November. The combined entity is now India’s sixth largest in terms of revenue.

“There is no cancellation or stopping of any transformation deals. Unlike the global financial crisis (of 2008) when things came to a grinding halt, there is a tremendous shift to focus on costs. This is because people want to bring in more efficiency and take some dollars out to fund transformation already in flight,” Debashis Chatterjee, managing director and CEO of LTIMindtree, told ET in an interview.

The company has seen deferment in transformation deals; for example, a project planned over 24 months may take around 30-36 months now, Chatterjee said.

There has been no impact on pricing – which has largely remained steady – in cost-based deals, he added.

LTIMindtree posted a 4.7% fall in net profit for the third quarter at Rs 1,001 crore, missing estimates due to a seasonally weak quarter and integration costs related to the merger. Revenue came in at Rs 8,620 crore, up 25.3% year on year, meeting ET’s poll of estimates.

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The company’s operating margins dropped 360 basis points to 13.9%, below analyst estimates, due to one-time integration costs and extended holidays in the third quarter. It, however, expects improvements from the March-ended quarter.“We have taken the bulk of the integration costs this (Q3) quarter and very minimal cost will go into the next quarter. Also, furloughs and fewer working days impacted us with another 130 basis points. Overall, the company expects 200-250 bps will be clawed back and we can expect that uplift in the fourth quarter,” Chatterjee added.

In a note, brokerage Elara Capital said that the company, post-merger, had comprehensive service offerings with erstwhile L&T Infotech’s engineering capacity and Mindtree’s customer experience prowess.

“However, in our view, integration process and merger woes, such as cost, attrition, and workforce and role realignment, pose near-term risks,” said the brokerage.

Earlier this month, LTIMindtree’s president of global markets and executive board member Venu Lambu quit to pursue external opportunities. Lambu has since been named CEO of headhunter Randstad’s global technology arm.

On top-level exits, Chatterjee said: “I don’t think we can stop people from pursuing opportunities outside but also there is not too much overlap in terms of portfolios and I’m not too worried about some leadership exits.”

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