LTIMindtree CEO Venu Lambu sees stronger growth ahead, expects profit margins to improve

Edited excerpts of the interview:

Take us through what you are seeing in the macro environment because all the other companies we have tracked, so far, say that there are delays in decision- making and in closure of contracts?

Look, the macroeconomic is what it is. So, I don't want to add anything more to the commentary on the macroeconomic situation. Instead, I just want to focus on what we are doing to get growth.

I started off thinking how can I take what the organisation earns in revenue and enhance the value creation over the next five to six years.

I had earlier mentioned three big strategic reports. The first one was, how do we get more competitive in our cost of doing business? That was a bid for future. It was not just a cost reduction initiative but it was also bringing more agility, enhancing work rate, reducing the span of control and making the organisation more fit to meet for the future.

So, that was one part of the programme. The second one was how do we reimagine our sales transformation efforts, so that we enhance our productivity and most importantly, how do we win big deals?

In a very demand constrained market, you have to win big deals. It's not about winning deals in small denominations, but it's about really winning the big ones and using that as a growth engine to deliver it.

That's the second aspect of it and we made significant progress on it as well when we moved Nachiket Deshpande (president for AI services business group) to the US.  We just aligned our organisations in different companies with Nachiket and over the last quarter or so, it has actually expanded more. There are more roles created within the organisation across Europe and US and we have strengthened the delivery capability of those organisations, and so on.

The third one was the strategic pivot towards being an AI-centric organisation, not AI-focused organisation. I usually don't like AI-first kind of organisation. We'll always be people-first organisation. We'll always be client-first organisation. AI is going to make people smarter.

So, these three pivots are actually the one which I'm focused on. Market is what it is.

This is also going to be your first full financial year as CEO. What can we look forward to? Is the second half likely to be better than the first?

My expectation is that at some time in the second half — it could be at the later part of Q3 or middle of Q4 — we can have a year-on-year growth closer to the double digit. So, that's the goal we are working on. The second is the margin expansion. Over the next couple of quarters, can we get 100 basis point in margin expansion, which again, I'm fairly confident of achieving that.

We did at least one improvement from Q4 to Q1. If there was no one-off expenses that came in, the gross benefit was actually 100 basis point, where the net was 50 basis point.

So, I'm fairly confident of expanding our margin over the next two quarters as well. We announced a large deal in Q1. I'll come back again, probably in a few weeks' time, to share another big deal, which we are at the stage of signing up. This could be bigger than the previous mega deal.

All this makes me fairly optimistic about how the second half will look like, unless things go really further south.

Your headcount is down 418 sequentially, while your revenue and deal pipeline is strong. Is headcount growth delinking from demand or is this because of AI integration?

To be honest, I've been thinking about it but it's too early to call it a specific pattern of non-linearity. But are we adding more revenue without increasing the headcount linearly? The answer is yes.

Not just this quarter. If you see the pattern over the last few quarters, even more than a year, you see that the revenue is increasing, headcount is not increasing linearly. That's sort of pretty much there now.

And to what extent, the non-linearity will come in. We'll also wait for some more time before I come back and say, you know, for every $20 million, or for every $100 million or revenue, we will add this much of headcount or we will not add this much of headcount.

How are your hiring targets looking for FY26?

We added 1,600 freshers in the first quarter, which is a good progress. Last year, we did not have freshers.

We'll add more freshers. Our utilisation is running at 88.1 percent. So that means we need to hire more people.

I spoke about large deals. Obviously, we’ll need to hire more people.

Peers like HCLTech are looking for specialised skills while hiring freshers. Their pay structures, too ,will quote a premium. Does LTIMindtree have similar plans?

Incidentally, we already have that, whether it was based on the kind of institutions from where we hired from or the skill sets, probably it's a combination of both. In fact, the year before when we had the fresher induction, there are freshers who have a differentiated salary within the company.

Even today, when we don't hire from campus, when we hire from lateral I see a pattern of a differentiated salary in the freshers based on the skill sets and based on things that they bring on the table.

What’s the update on your wage-hike cycle for the year?

Yeah. We did the wage hike last year in October. So, when we get closer to October, we will take this topic and we will discuss and take it from there.

I think it's too early to comment on that. We still have some time before we go in October. So, we have time in September, to discuss it internally and make a decision and we will inform around that.

What drove the 50 bps QoQ margin expansion to 14.3 percent in Q1? Do you expect this to continue? Levers in place to achieve the aspirational band of 17-18 percent?

Well, the aspirational band on the upper end is, yes, 18 percent but that's not going to be for this year’s plan, it's a 5-year plan.

For this year, I'm looking towards being at 16 percent sometime in the second half from our current 14.3 percent.

Some of the levers we are exploring include getting smarter on managing direct costs, average resource costs and getting smarter on sales productivity along with all the other classical pyramid management things.

How much of the uncertainty among clients is being influenced by the Trump trade deals? Do you expect it to stabilise in Quarter Two, especially the consumer-facing industries?

The consumer services industry is actually remodelling. They're not waiting for any end point, though things change too frequently in a short span of time. But, yeah, they're sort of remodelling. A lot of customers that I talk to are always redesigning their supply chain or the distribution point, the cost of sourcing, and all that.

It's become BAU (business as usual) way of doing things, of adopting to those things. I see a huge resilience in that industry and how that adoption is happening as the things change but stability is always good for every industry.

The more stability comes in, there'll be more certainty around those businesses. But, yes, our customers are reinventing, reimagining, as things change, they're doing it. And we can see that in our discussion.

We can see them seek our help in these areas, whether it is cost reduction or reimagining certain delivery centres in different locations. In some cases, they could even ask for AI solutions in modelling different scenarios for them.

You started GCC-as-a-service offering in July? How has the traction been so far?

It's easy to enter as a GCC but you have to be very smart to manage the GCC throughout the first one-year journey. The biggest aspect is about the cost escalation in GCCs. In some GCCs, we are seeing that because of cost escalation or some budget constraints, the plan they set out with becomes challenging, especially for the mid-tier GCCs, as they move forward in their journey.

I felt that there's a challenge here. Hence, there's an opportunity for us to come and help the customers where we will provide a very comprehensive as-a-service model. We have partnerships in the system to help the customers to set up GCCs here.

We will bring in our own internal HR best practices to set up the HR structure and HR policies for the GCCs. We have a very robust talent acquisition engine. Then we will give access to all our service line capabilities. We give access to our BlueVerse and so on. And all this, we're trying to unitise it as a model of pricing right with an inflation protected or a cost escalation protected for GCC.

If they sign up with us within three or five years,  they get pretty much a certainty of the cost on how the GCCs can be run. I think this is something very unique. Not sure how many of them can offer this. Because of our combined capabilities, we were able to offer this and we received a good response on that offering.