LTIM reported strong revenue growth of 2.3% QoQ CC (USD 2.8% QoQ), in line with our estimates of 2.3% CC and above consensus estimates of 2.4% USD QoQ. The growth was broad-based across verticals and geographies with healthcare growing by 6.1% QoQ while BFSI sustained its growth momentum with 3.9% QoQ growth. EBIT margin grew by 50 bps QoQ to 15.0% vs our estimates of 30 bps improvement largely due to absence of one off visa expense incurred in Q1. Deal wins were steady in Q2 with bookings of US$ 1.3 billion, including a multi-year large deal of US$200 million TCV.

The company executed strongly with broad-based growth across verticals and geographies aided by healthy momentum within BFSI coupled with strong recovery in other parts of the portfolio. Despite having strong momentum across BUs, the nature of the engagement continues to be cost-focused while discretionary continues to get deprioritized. The order inflow remains strong at $1.3bn, while Q2 recorded a multi-year $200m large deal within Manufacturing vertical. The management indicated that, the intensity of furlough in Q3 would be lower than the last year’s, while Q4 is expected to see a further rebound from a Q3 low base. Having said that, the management also maintained caution on geo-political tension and US election, which might derail H2 performance. With strong broad-based execution, elevated deal TCV and continued momentum in BFSI, we are revising our growth estimates by 10bps/50bps/20bps for FY25E/FY26E/FY27E.

The execution on margins was strong in Q2, however the majority of the margin levers are fully utilized and the incremental growth would only be driven by similar uptick in volume. With compensation revision in Q3 (estimated 200bps impact), utilization at its peak (~88%) and continued investments in SG&A would pressurize margins in H2. We are cutting our margin estimates by 40bps for FY25E, while broadly keeping the estimates unchanged for FY26E and FY27E.