IT outsourcer LTM Ltd’s chief executive Venu Lambu is eyeing faster growth this fiscal year, driven by the company’s first acquisition, despite the rise of automation tools and macroeconomic uncertainties.
In a virtual chat with Mint on Monday, Lambu, who will complete a year as CEO on 31 May, said the focus now was on profitable growth.
“Growth fundamentally is the beachhead of any company, like life and oxygen. It solves many issues, whether it's employees' progression, our ability to invest in talent, giving returns to shareholders, and everything is centered around growth. Most importantly, profitable growth,” said Lambu.
Strong FY26 performance
In his first year as chief executive, LTM reported its fastest growth in three years when its revenue jumped 6% to $4.76 billion in FY26, compared to 4.8% in the previous fiscal year. LTM grew its revenue faster than the five larger peers. The company's net profit jumped 11.3% to $606 million in FY26.
Much of its current growth was on account of its largest deal last October, a six-year IT transformation deal valued at $585 million from New York-based entertainment company, Paramount Global.
Investors remained wary, with the company’s shares falling 34% since the start of the year, the steepest among the country’s 10 largest IT services companies.
A candid Lambu said he was not sure why, and attributed investor concern to a negative perception of IT services companies.
“There is a sectoral outlook, which I believe is overstated on the negative side. And that is where I said at the beginning that only one side of the narrative is heard when it comes to AI (artificial intelligence). The second thing is that I think the IT sector has to outperform,” said Lambu.
He added that AI would reduce human needs to some extent, but not to a large extent. London-based Lambu added that the “notion that the entire IT services businesses will disappear is not the case. It will be re-imagined and remodelled”.
LTM was formed in November 2022 after Larsen & Toubro made a hostile bid to acquire Bengaluru-based Mindtree and later merged it with L&T Infotech.
For now, the company is looking at continuing its growth momentum by entering new markets. To this extent, LTM announced its acquisition of Randstad’s technology and consulting business for $186 million. This is its first acquisition since it came into existence.
However, questions were raised on the acquisition, as Randstad’s tech business had reported a revenue decline for three two consecutive years.
“We expect revenue growth in the near term (FY27 and FY28) for the target entity to be subdued due to continued portfolio pruning,” said ICICI Securities analysts Ruchi Mukhija, Aditi Patil, and Seema Nayak, in a note dated 23 May, adding that the revenue decline was also because of top clients in-sourcing their tech work.
The company’s management said it was focused on scaling its GCC practice by helping Randstad’s clients scale GCCs in India, dismissing concerns of the lower revenue it would get.
“My initial conversations with a few of Randstad’s clients have been very encouraging. They're very happy that they have got a partner who can give them a whole set of capabilities now including for their GCCs. So for me, it's a growth opportunity. Secondly, I wouldn't be overly concerned about whether $500 million will become 480, 490, or something like that. The point is that we have an aspiration of doubling our revenue in five years, and for that, access to the newer markets with an embedded capability is extremely important,” said Lambu.
According to the company’s annual report, LTM is expected to double its revenue to $10 billion by March 2031, a year before it had originally planned. For now, this acquisition is expected to increase its footprint in Europe, which makes up about 15% of its business, or about $710 million.
“The deal gives LTM access to marquee clients in Europe and Australia, which is useful from a market access standpoint. However, we think this is a phase where acquisitions need to be more capability-led, especially around AI, rather than just geography or accounts,” said Motilal Oswal Financial Services analysts Abhishek Pathak and Keval Bhagat, in a note dated 22 May.
For now, the company is expected to rope in each of the 2,700 Randstad employees, most of whom are based closer to client locations. However, the management said it is not looking to hire laterally or increase its fresher hiring targets.
“Last year, when we grew, we cut lateral headcount so I would expect the same thing for this year. In our core organic business, I wouldn't expect any big change in the lateral layer. I would expect it to be flat or negative. I think we added about 6,600 freshers if I remember correctly. So we're sort of looking at more or less the same number of offers we're going to make this year,” said Lambu.
The company ended last year with 87,950 employees, up by 3,643 from the preceding year.
Lambu added that the company does not face any material impact from the green card rules, which mandate applicants to apply for permanent residency from their home country. He added that the company has increased local hiring in the US and reduced dependence on H-1B workers.