BENGALURU (Reuters) -Indian IT services firm LTIMindtree reported a smaller-than-expected profit for the seasonally weak third quarter, with the demand environment continuing to remain challenging as clients cut back spending on discretionary projects.
The company’s operating margin expanded to 15.4% year-on-year, but fell short of its expectations of exiting the fiscal-year at 17%-18%.
Margins, however, contracted sequentially by 60 basis points, which the management attributed largely to higher-than-expected furloughs and fewer working days during the quarter.
The company won’t be able to achieve the aspirational margin band of 17%-18% for a few more quarters as it aims to make investments in the business, CEO Debashis Chatterjee said in a post-earnings call.
Consolidated net profit rose 16.8% to 11.69 billion rupees ($140.63 million), below analysts’ estimates of 11.76 billion rupees, as per LSEG data.
Revenue also rose 4.6% to 90.17 billion rupees, but missed analysts’ estimates of 90.51 billion rupees, primarily due to a 1.4% fall in the Banking, Financial Services and Insurance (BFSI) vertical, the company’s largest.
The company said the drop in revenue growth in the BFSI division was due to higher-than-expected furloughs and the division has a cautionary approach towards new spends.
Adding to this, Chatterjee said the overall demand environment was “extremely cautious”.
“Against the backdrop of a continued challenging macroeconomic environment and delays in client decision making, we expect Q4 performance to remain similar to the current quarter,” he said.
The company’s deal total contract value (TCV) rose 21% year-on-year to $1.5 billion, its highest-ever.
The quarter saw Indian IT companies reporting mixed numbers, but their commentary largely indicated that the demand environment has not worsened sequentially, as was feared.
Infosys, India’s second-largest IT company, narrowed its revenue forecast for the year, while HCLTech, the third-largest, trimmed its forecast.
Mumbai-listed shares of LTIMindtree closed 0.64% higher ahead of its results.
($1 = 83.1230 Indian rupees)
(Reporting by Haripriya Suresh in Bengaluru; Editing by Sonia Cheema)