Thanks, [Inba?] .

Good day, everyone, and welcome to LTM's Q2 FY2027 earnings conference call. Today on the call, we have with us Mr.

Venu Lambu, Chief Executive Officer and Managing Director; and Mr. Vipul Chandra, Chief Financial Officer and Whole-time Director.

We'll begin by providing a brief overview of the company's Q2 FY2027 performance, after which we'll open the floor for Q&A. Please note during the call, we could make forward-looking statements.

These statements consider the environment as we see today and carry risks and uncertainties that could cause our actual results to differ materially from those expressed in today's call. We do not undertake to update any forward-looking [statements?]

. I'll now turn the call over to Mr.

Venu for his opening remarks.

Thank you, Vikas. Hello, everyone, and thank you for joining us.

We closed Q2 FY2027 with broad-based growth across our business, reflecting disciplined execution of our strategy. This quarter, we made significant progress towards becoming an AI-centric organization.

We deepened our AI capabilities, reimagined our partner ecosystem, invested in future-ready talent, and accelerated AI-led revenue through the continued expansion of our BlueVerse ecosystem. We are excited to see that client spend is shifting towards AI deployment cycle, which includes reimagination of business process, scaling contextual implementation, ensuring sovereignty, and optimizing economics.

This plays to our strength of deep domain technology expertise and the ability to deliver consistently in complex enterprise environment. We see this in the growing number and scale of our engagements across enterprise AI, business AI, industrial AI, and marketing and creative AI.

Our progress is reflected in three areas: the deals we are winning, the reimagination of our capabilities and talent, and the evolution of our BlueVerse ecosystem. I will take you through each of these today.

Let me now share the financial performance for the quarter. We reported revenues of US$1.24 billion, delivering 1.1% growth on a sequential basis and 5.1% growth on a year-over-year basis in constant currency terms.

EBIT margins came in at 15.6%, a 10 basis point sequential improvement. Our order inflow stood at US$1.3 billion.

The order inflow reflects AI-centric deals that are short-tenured, have a faster revenue realization, and are incremental in nature. Our overall deal pipeline, including large deals, remain healthy.

AI revenue for the quarter has reached 13.4% of our overall revenue, a growth of 40% year-over-year. Including enterprise AI, cumulative AI revenue grew 47% year-over-year.

Let me now turn to some of the notable deal wins this quarter. We were selected by the leading global banking and financial services institution as their strategic technology partner for consolidating and delivering technology services across wealth and personal banking.

We were selected by a leading North American specialty construction company to consolidate and build an AI-led operating model designed to deliver resilient outcome-driven infrastructure managed services. We were selected by a US-based insurance company as a strategic partner to consolidate its global IT services and embed AI across its managed services.

We expanded our relationship with a large US property and casualty insurer as a strategic AI-led engineering partner to improve operational efficiency, accelerate delivery, and strengthen quality assurance. We were selected by one of the world's leading CPG players to support their marketeers and brand managers across multiple businesses in transforming the concept to creative process and improving speed to market.

We were selected by a leading global music entertainment company to implement an AI-enabled financial planning and capital approval platform to replace their manual, spreadsheet-driven process. Let me now share updates on our industry segments.

Three of the four industry segments grew by over 7% year-over-year in quarter two. All numbers referenced next represent growth in constant currency terms.

Financial Services continues its strong momentum and delivered a robust 3.1% sequential growth. On a year-over-year basis, it has returned to growth, reporting 0.4% expansion.

Tech and Services delivered a healthy year-over-year growth of 7%. Sequentially, revenue was lower by 4%, reflecting a seasonal, quarter-specific move.

Consumer segment grew by 0.3% sequentially and by 8.6% on a year-over-year basis. Production segment reported a sequential growth of 3.7%, contributed by both manufacturing and energy and utilities segments.

On a year-over-year basis, it grew by 7.4%. On a sequential basis, Americas grew by 1.5%, Europe grew by 1%, and the rest of the world declined by 1.4% due to the revenue impact in our Middle East business.

All our client categories from US$5 million-plus to US$100 million-plus expanded year-over-year. I'm pleased to share that during the quarter, we added a financial services client to our US$100 million-plus client category with the further growth potential in the accounts.

At the end of Q2 FY2027, total headcount stood at 88,835, reflecting a net addition of 949 employees sequentially. Total fresher additions for the quarter were 1,743.

Our AI.1000 program to develop forward deployed engineers is on track, with nearly 1,000 employees in mentor and persona-based journeys and 2,000-plus certifications across Claude, Gemini, Copilot, and Azure AI. We have completed a global sales enablement program during the quarter to train our sales teams on our AI capabilities, we are best-placed to help our clients lead in the agentic enterprise era.

We continue to see consistent external validation of our capabilities by industry analysts and partners. This quarter, we received several recognitions.

I will call out few of them. We won a Gold Stevie Award for BlueVerse as Best AI-Powered Product or Service at the International Business Awards 2026.

BlueVerse was also recognized for Excellence in AI Software and Digital Platforms at The Times of India AI Quotient Awards. We were recognized at the ISG Paragon Awards North America 2026 in the Excellence category for our work with Phinia, and in the Transformation category for our work with Carrier.

We were named leader in three quadrants of the ISG Provider Lens Microsoft AI and Cloud Ecosystem 2026 report for the US. We were named among Ad Age's Top 25 Global Agencies for our interactive practice.

We won the 2026 India Gold MIKE, Most Innovative Knowledge Enterprise, award for our knowledge management maturity and practices. We were recognized as the winner for Leading Practices in AI Adoption at the People First HR Excellence Awards 2026.

We won several Brandon Hall Group HCM Excellence Awards 2026 across learning and capability and sales excellence, including best use of CRM solution, best model of a growth-focused organization, and the best use of collaborative learning. Please refer to our fact sheet for a complete list of recognition.

We continue to strengthen our BlueVerse ecosystem to address every layer of enterprise AI transformation: AI foundry services, data modernization, AI-led engineering, domain-specific SLMs, agentic products, and governance. We are building capabilities that help clients move from experimentation to scaled deployment.

Let me talk about some of the newest capabilities we have added this quarter. We recently launched BlueVerse OneToken, a workload routing and a governance layer that automatically channels enterprise AI requests to the right model at the right cost.

We launched BlueVerse RightLogic, our cybersecurity assessment and risk assurance framework, designed to help enterprises identify, assess, and remediate cyber exposure as they accelerate AI adoption. We introduced BlueVerse Sovereign Small Models, a suite of domain-trained AI models designed to help our clients convert their proprietary knowledge into lasting advantage.

We created three new domain-specific small language models and were granted six AI patents. We are refining our strategy to help our clients build and scale GCCs.

With the new business unit, we bring together a seamless operating model, governing entity, physical infrastructure, future-ready talent, and agentic process transformed with BlueVerse. We continue to deepen our partner ecosystem.

Let me share some of the key highlights. Through our partnership with Anthropic, we have now fully embedded Claude and Claude Code into our BlueVerse AI delivery fabric.

This partnership will also help us to accelerate Claude adoption, expand our pool of FDEs, and establish our Claude Center of Excellence. We partnered with Glean to connect enterprise knowledge layer with BlueVerse.

This gives clients a governed path from an enterprise search to autonomous agents. We partnered with Cognition to bring its software engineering agent Devin to BlueVerse RightLogic.

We collaborated with IBM and Red Hat on the Project Lightwell to help enterprises discover vulnerabilities and validate fixes at scale. We collaborated with Chainguard, the trusted source for open source, to strengthen software supply chain security through BlueVerse RightLogic.

We opened a new global delivery and AI competency center in Kolkata, and expanded our BlueVerse studio footprint to Hyderabad. I would now like to share a few proof points across four types of AI work that we are delivering.

In enterprise AI, for a global media and entertainment company, we developed an integrated agentic recovery platform to modernize fragmented IT operations. The platform achieved 100% classification across 18-plus failure scenarios.

For a leading European paytech company, we deployed 12 specialized AI agents across the SDLC as part of the large-scale payment modernization program, reducing the delivery cycle time by 50% and cumulative development effort by 38%. In business AI, for a leading investment management company, we are building intelligent retirement solutions that serve customers through assisted agents and autonomous handling across initial selected plans that will be extended further.

The solution is driving cost transformation, a unified experience, and a faster response. For a global petrochemical leader, we deployed an AI-powered HR agent to unify fragmented HR services and provide intelligent self-service policy guidelines and workforce lifecycle support.

This has the potential to reduce HR tickets by 40% through agent-led self-service. In marketing AI, for a global food service business, we enabled AI-powered content generation to deliver more personalized product experiences and improved digital engagement.

This generated 50% productivity gains and enabled 10x faster campaign launch. For a leading home improvement retailer, we redesigned checkout experience for buy online, deliver from store orders to validate saved customer vehicles.

This reduced the checkout interactions and improved time to purchase. In industrial AI, for a leading global automotive manufacturer, we deployed an AI-powered predictive maintenance solution to detect laser blanking failures before they occur, reducing unplanned downtime and operations, and increasing production through.

For a global environmental services and water management company, we deployed agentic AI-based digital twins, robotics to modernize water operations at more than 400 sites. This reduced manual effort by 50% and enabled 2x faster in.

With this, I would now like to hand it over to Vipul for an update on the financials.

Thank you, Venu. Good evening, everyone, and thank you for joining the call.

Let me now walk you through the financial highlights of the second quarter of FY2027. Starting with our revenue performance, our quarter two revenues stood at USD 1.235 billion, reflecting a growth of 1.1% quarter-on-quarter and 5.1% year-on-year.

Corresponding dollar [unclear] was 0.7% quarter-on-quarter and 4.7% year-on-year. Revenue in INR stood at [unclear] crore,

Okay. Is this better?

Revenue in INR stood at 11,808 crores, representing a growth of 1.7% quarter-on-quarter and 13.6% year-on-year. Our EBIT margin expanded by 10 basis points sequentially to 15.6%.

The PAT margin came in at 11.7%, down from 12.7% last quarter, as we had a one-time gain on the recognition of the value of our investment in Voicing.ai in Q1. The effective tax rate remained unchanged at 25.8% compared with Q1 FY2027.

Basic EPS was Rs. 47.2 for the quarter as compared to Rs.

49.5 in Q1 FY2027. Our total DSO for Q2 improved by one day, closing at 84 days compared to 85 days last quarter.

The operating cash flow to PAT ratio is at 39%, down from 79% in Q1. This is mainly due to certain advance payments and funding towards a one-time gratuity provision on account of labor laws impact.

Free cash flow to PAT ratio stood at 24% compared to 63% in Q1. The reason for this decline is similar to the above.

Cash and investment balances stood at USD 1.6 billion or Rs. 15,300 crores, compared to Rs.

15,021 crores in Q1 FY2027. Return on capital employed for the quarter was 28.5% versus 29.8% last quarter.

As of September 30th, 2026, our cash flow hedges stood at USD 4.49 billion. Hedges on the balance sheet were USD 334 million.

Utilization, excluding trainees, remained flat at 86.4% for the quarter. The headcount at the end of Q2 was 88,835, and fresher additions stood at 1,743.

For the quarter, our trailing 12-month attrition remained stable at 13.3%. The Board of Directors has approved an interim dividend of Rs.

25 per equity share, an increase of 13.6% from the corresponding quarter of the previous year. Regarding our previously announced plan to acquire certain Randstad digital businesses in Europe and Australia, the approval process is on track, and we expect to receive all the approvals in Q3 as previously communicated.

During the quarter, we achieved ESG leadership status, receiving a score of 76 from NSE Sustainability Ratings and Analytics Limited. The company was also rated in the leadership category by SES ESG Research Private Limited with an ESG score of 77.3, placing it among the top-performing Indian companies by market capitalization.

I now hand it back to Vipul for the business outlook.

Sorry for that. Just adjusting the mic.

Thank you, Vipul. As we indicated at the beginning of the year, we expect our growth trajectory to continue to strengthen as the year progresses.

We delivered a 5.4% year-over-year growth in the H1 FY2027 and continue to expect stronger sequential growth. As AI adoption accelerate, we're seeing a growing demand across the AI stack, reinforcing our conviction that AI will become foundational intelligence layer for modern enterprises and our primary driver of growth.

The continued confidence our client place in us, our disciplined execution, and the speed of our AI pivot makes us well-positioned to accelerate the growth momentum. Thank you, and the floor is open for Q&A now.

Hi, thank you for the opportunity and congrats on really strong growth in BFSI. Venu, you talked about how the high-tech segment has seen a seasonal decline, and I want to know if the quantum of that will be the same every year as this is due to the anniversary of a large deal renewal or something like that that impacts you every year?

Yeah.

Yes, it does, because our top account in the tech sector, a financial year starts from July onwards. Those are the times when you always have the renewal cycle that begins, it's not something new for us.

We always have managed that and absorbed that over the year. I think this time there is also an additional element when you look at the tech numbers, that is our business in Saudi, which is classified under the tech because it's through a JV that we do with a tech company there and hence it's classified as under the tech.

You also see the tech decline has got two elements. One is the renewal cycle impact, which is seasonal and known one.

The second is the Saudi business impact that is factored in that segment.

Right, thanks for the clarification. You're still adding people pretty strongly, right?

Can we think about as saying that the model is still linear largely, and over time as we get royalty revenues from different IP that you create, that changes, but that will be a very gradual change?

Firstly it will be a gradual change. If you look at it, the headcount addition and the revenue will not be linear anyway.

We've demonstrated that over the last few quarters, right? In the whole of last year as well, when we delivered we did not increase the headcount, and so was this year in the Q1 and when we look at this number.

Actually this is a very positive thing for us that we are adding people because there is that demand outlook that we have. That will still establish a good non-linear equation that AI will provide as an opportunity.

It'll be gradual, as we go along. It's not going to be one switch button, but what is more pleasing is that we are adding people because we have the outlook of the demand.

Just one follow-up there. Although you talked about good outlook, the deal wins are a little lower this quarter, can we think about how the new deals are mostly, say, time and material and therefore you don't really see that in the TCV number?

Great question. Look, I think, we've sort of gone through a very strategic approach on how we looked at the transformation pivot because one of the things that I'm very clear is that if you have to pivot this into an AI-centric organization, we also need to look at the KPIs a bit differently, right?

If we have to get more AI-led deals, because that is what will help us to build capabilities, those are the deals that will help us to add value to our customers in the AI era, then those deals happen to be the shorter-duration deals, but it has a great opportunity faster revenue acceleration because you don't have a long transition period that you associate with the traditional ITO deals. I think that this quarter we saw majority of those deals were AI-led deals because I did share with you quite a few wins we had and the kind of work that we're doing in.

For me, it is a good leading indicator in terms of how our sales team, especially now that we trained them, we did a boot camp across the world, and that boot camp is producing the results in terms of generating more AI-led deals. Having said that, there will always be one or two quarters where you'll still have those traditional large deals which will come at the back of vendor consolidation or switching over from one vendor to the other, right?

Those kind of deals will still be there, and in those scenarios, the deal value for that particular quarter will increase. This was a very conscious effort that we are going because you have to change the way we look at it.

We need deals which are genuinely have the AI nature into that, leverages all the investment we have done on our BlueVerse ecosystem, and finally, it should be an opportunity to accelerate revenue. That's been one of the question by most of them in terms of TCV linkage to revenue and that's what we are working on.

Thanks a lot, sir. Best of luck.

Hi. Thanks for taking my questions.

Venu, just to basically continue the last discussions that was happening on the deal wins front. As you mentioned that we are now moving towards maybe an environment in which there are a lot of short-duration deals which does not get captured in the TCV number adequately.

Two parts to one on that. One is, do you think this is kind of a temporary phase that because GenAI at this point of time is in initial stages of and gradually as the technology matures, the deal sizes will also become bigger and hence we could see the number then becoming more relevant?

Secondly, for this interim period or let's say for a longer period of time, if the TCV number now becomes less relevant than it was before, is the management considering for the benefit of investors and analysts providing us with some other number let's say like ACV, which will be annual contract value, which would be able to cover those shorter-duration deals. A couple of our competitors do provide us with that data.

Because at the end of the day, what we as an analyst investor community need is some sort of a visibility to be able to project the revenues going forward. How do we look at the company from a two, three quarter or a point of view?

Any consideration on that?

Sure. No, great point, Vibhor.

Firstly, if I look at the deals that's happening and is it temporary or will it get converted to the big deal? I think it sort of depends on how the clients decide their adoption strategy.

I'll probably take two examples to explain that, right? One is when you start doing an agentic transformation or AI-led transformation into the HR organization of an enterprise, you get certain deal size, right?

That will involve about 6 months to 8 months kind of work to transform the HR organization of an enterprise. That doesn't stop there.

All customers are moving towards making their enterprises self-autonomous or AI-centric organization. You will move on to the other process, that is supply chain, or finance processes, or manufacturing processes, and so on.

Hence, at least in the short and medium term, the AI deals will be of that nature, right? It'll be short-tenured deals, but a faster iterative deals.

You do that and you keep getting more and more deals and we're seeing that. The start-up time to realize revenue also is much quicker because, unlike the traditional services where you do a 6 months, 8 months transition and then you start delivering steady-state model, in AI, you actually go with a prototype.

With all the assets that we have built, with all the capabilities we have built, you essentially build a prototype and then convert into a services in a product way and then start realizing the revenue. That's where the revenue acceleration aspect sort of comes about.

The third is that, look, we'll have to wait for couple of more quarters, Vibhor, to sort of come to a split-up between what we can share with regard to the ACV and traditional TCV deals, which I don't think is going to be difficult. We can share that with you.

I wanted to wait for couple of more quarters, at least for one more quarter, and before we start sharing with you. Even in this deals value, the order book number that we shared, the significant part is ACV, right?

It's a very majority part is ACV deals. Allow us one more quarter so that we can be very definitive on that.

We are excited about where this is going on. There are still large deals out there, which essentially switching over the market share from other vendors and taking those deals, whether it's in the AI-led software engineering or in the agentic operations or large-scale technology modernization programs.

Those large deals are still there out there, and we're still going after those large deals as well. Specific to AI, this is how I look at the status.

Got it. Got it, Venu.

I think that would be really helpful whenever the management is confident in sharing that number.

As an extension,

as an extension of this question, Venu, if I may just ask, so, look, I think TCV or ACV at the end of the day, I think all that most of us want and I'm sure what the board and the management is looking for is a better revenue growth. I'm sure these deals, short-term duration, will probably lead to a higher revenue growth.

What is the outlook that we are looking on that? Last year when we were in Q4, we were hoping to touch a double-digit Y-o-Y growth rate, which we missed by a whisker and we were quite there.

In the last two quarters, we kind of drifted a lot away from that number with a number of around 5 and 5% to 6% Y-o-Y growth rate only on the overall portfolio. Now, I understand this quarter might have been impacted by the Middle East war and all.

Overall, do you see us the company moving towards a close to a high-single digit or a double-digit kind of a number, maybe towards the end of this year, maybe FY2028? What is the outlook that when do we reach there and what is the outlook that you see on the growth part there?

As you rightly pointed out, Vibhor, that Q2 if that Saudi impact would not have been there, I think we had the gap of about 0.7% or 0.6% approximately. The growth opportunity that got missed out because of the impact that we had in our Saudi business, right?

Otherwise, we would have been somewhere at 1.7% or 1.8% quarter-on-quarter growth, but it is what it is. The good news is that we have lot of demand elsewhere, right, outside of the Saudi, because what's the situation in Saudi is beyond our control, there's little we can do at this stage on that.

There is a lot of demand outside there. I very optimistic about continued growth momentum in the second half of the year.

When we started in the Q1, I made a promise that every quarter will be better than the previous quarter. I will hold on to that and say that Q3 and Q4 will be better quarters than the first quarter for sure, number one.

Number two, FY2028, absolutely. That's the aim and we expect the Randstad acquisition approvals to be done, closure to be done by the end of Q3.

Then we will have 3 to 4 months' time for us to realign the newer markets that we are inheriting in Australia and Europe and something. Second, the fact that BFSI is back to growth, right?

It has delivered two sequential growth and it is back to year-on-year growth, it has only one way to go up, which is going up. Tech has delivered a fantastic year-on-year growth.

All other verticals, if you see, has delivered a, 7 and 7%-plus year-on-year growth. It is one such event in one particular region, even though that is contributes very small percentage of the overall revenue, but an absolute revenue, it went down materially this quarter, the Saudi revenue, right?

Hence it is. Otherwise, three out of four verticals we have, have actually growing above 7%.

I'm really confident about the next two quarters and also with the new capabilities we'll inherit in the Q4, we should be very well positioned for FY2028. Got it.

Got it. Great to hear that, Venu.

Thank you so much for taking my questions and wish you all the best.

Yeah. Thanks for the opportunity.

Couple of questions. First about the progress on if I look, let's say, RoW, growth is not there, slightly weakness, which indicate progress on CBDT deal seems to be slower.

Can you give some sense how one should expect that deal to ramp up? Second question is about overall growth outlook.

You partly indicated about weakness in Saudi as some implication. Earlier, we were very confident to at least deliver FY2026 kind of growth in current year.

Are we on track to, let's say, despite some challenges we face, are we on track to deliver '27 at least closer to '26 kind of number? If yes, in a way you are indicating some kind of significant acceleration in next two quarters.

These are the two questions, then I have a question on high-tech, maybe if you can answer this, then I can

Sure. Firstly on the rest of the world, I think, as I said, it's the Saudi business, which was material for us this quarter.

Otherwise, I would not have called that out because there's an absolute revenue impact that happens in that war geography at the moment. It's a difficult thing over there especially with some of our customers.

That's why you see rest of the world factors that part. With regard to the CBDT, CBDT did contribute the revenue for the Q2, right?

I think last time when I spoke to you all, I mentioned about the hardware pricing and the delivery timeline being impacted. It is getting better.

From the time that I spoke at the end of Q1, it's definitely getting better. You should see a gradual ramp-up that is going to be linked to the hardware delivery that will happen in CBDT.

We're pretty much on track on that part of the revenue. It is just that it is dependent on hardware availability, but it has definitely progressed, it has definitely improved from where we were in Q1 when I spoke about these topics.

The second is I think the other question that you were asking me about the FY2027. Look, as I said, H2 will be better than H1, that's number one.

Number two is that, FY2027 overall year growth coming to the FY2026, that's our endeavor. We're working towards coming as close as we can to the FY2026 growth, right?

There's a lot of good demand out there. We have built fantastic capabilities.

We are seen as an AI-centric company now already by our customers and with the industry analyst. I'm fairly optimistic on our journey.

In summary, I can say H2 will be better than H1.

Understand. Just on high-tech, you indicated, let's say, part of the weakness is because of seasonality in the business and some impact from Saudi-related business.

How should one expect, let's say, because now your top customer also renewal played out. Can you give some update about how you expect, let's say, next fiscal for that account to play out and overall high-tech growth to play out?

Second question about, I think, cash conversion. We indicated some of the reason.

Can you quantify what would be the impact of the gratuity and other factor which you indicated on cash conversion this quarter? Thank you.

Yeah. I missed the second part of the question.

Let me answer the first one and you could repeat the second one again, Dipesh, if you don't mind. On the first one, look, I think the Tech Services vertical, as I mentioned, there is a part of the Saudi business because we route it through our JV partner, which is a tech company, hence it's classified under that.

With regard to the if I just keep that aside, which will be static anyway when we go to the Q3 onwards, we're seeing a pretty good demand out there in tech, and we will be back to normal. This was this was expected.

This was seasonal renewal impact. We'll be back to the normal growth trajectory in the tech vertical.

We've got some good deals out there, which will start realizing revenue as we go into the Q3 and beyond. Outlook for the next year is also good on the tech side.

We're dealing with customers who are growing massively, right? They need a lot of our help to support their big growth agenda.

None of the tech customers are showing any signs of slowness of growth, right? They're all growing phenomenally well.

We are really pleased to be partnering with all of them, and we are diversifying into many areas and we'll continue to grow in tech vertical. I just look at tech as a more of a seasonal renewal quarter plus the Middle East impact.

Understand. On cash conversion, I think can you quantify, let's say, we indicated two factor.

Certain advancement and funding toward gratuity pertains to new labor code. Can you quantify the impact and from next quarter, it should normalize or how one should look at it?

Sure. In terms of the, the exceptional outflows that I mentioned about, I think all of us, all of you would remember the gratuity-related, provisions that we had taken in Q3 of last year.

Now, once we have taken the provision, the same amount also has to be funded, for meeting that liability. I think in this quarter, we have done substantial chunk of that funding.

There is a deadline for that funding to also get completed, which is by October. There may be a small impact coming from that remaining funding in the next quarter, but largely it should return back towards normalcy.

The other outflows which happened is on the the final dividend that we paid out in Q1, the TDS on that did not get paid out in the same quarter and that came out in the second quarter. That was another, one-off difference between the previous quarter to this quarter.

We also had advance tax outflows both in India and US happening in this quarter. Overall, I think it was a confluence of two, three things coming together, and that is what led to the reduction in the OCF to PAT ratio.

You expect it to normalize into quarter three, right?

It will normalize in quarter three, except that, to some extent, the gratuity funding may still be happening, it may not come back to the previous levels which we were going at. We did get the advantage of these in the previous quarters when our OCF to PAT were higher as well.

Understand. Thank you.

Yeah. Thanks for the opportunity.

The question is on margins. If we look at first half being 15.5%, last year being 15.4%, and second half will be heavy in terms of revenue mix, where growth could be led more through pass-through revenue, which happens traditionally, plus CBDT deal gradual ramp-up.

Fourth quarter will have a margin headwind with M&A of Randstad. In this scenario, any update in terms of what is the target margin, EBIT margin, on exit and the full year we are looking at even for FY2028?

Sure, Sandeep. I think we had mentioned earlier that we are working towards maintaining our margin for this year at similar levels to previous year.

I think we are still working towards that. If you see sequentially in Q1 and Q2, we have expanded our margins.

We are done with our wage hikes as well. After absorbing all that, we have come in at 15.5% and 15.6% respectively in these two quarters.

Also, in terms of the growth in the next two quarters, I don't think we are expecting growth only to come from the CBDT ramp-up or the pass-through revenues. Our regular services business demand is also looking robust as Venu has already mentioned.

The initiatives on cost control side are also continuing. We do expect the organic margins to continue to hold on and improve further from here.

The impact on account of Randstad acquisition is going to be more in terms of the amortization impact, which anyway, given the value, etc. is not going to be that significant.

All in all, I think I would conclude by saying that we are still working towards maintaining our margin at similar levels to last year.

Sir, that commitment is on consol basis, not on organic, right?

I'm sorry.

What you said the margin being flat in this year versus last year, this is including M&A and at consol level, not at organic level?

That's the target we're working towards, Sandeep, yes.

Thanks, and all the best.

Yes, thank you for the opportunity. A couple of questions.

Firstly, your top client in BFSI has made certain comments in their recent earnings wherein they have talked about tech vendor spends being down 30% year on year as a result of AI adoption and otherwise insourcing. Also that there is still a very long way to go on that contraction as well as insourcing that is that is happening.

Can you give some color in terms of how it has behaved for us in the past, and how do you think it could potentially play out for us in the near to medium term?

Rishi, thanks for the question. Firstly, the top client that you're referring is an engagement which has gone through a consolidation from 50-plus vendors to about five vendors, right?

We are one of those five vendors, right? From the client perspective, that savings comes through this consolidation exercises.

Second, when we renewed it or when we've got the deal of this vendor consolidation engagement at the later part of last year, we already called out the productivity headwinds that we'll have to bear for the first two quarters. That's what we went through in the Q3 and Q4 of last year.

That's when we started the sequential growth. I said that we are done with that productivity headwind that was a commitment to be given as part of the vendor consolidation.

We said we're done with it when we announced the Q4 results, and hence you saw a sequential growth happening in Q1, and you also see the big sequential growth happening in Q2, and I also commented that it'll continue to have the sequential growth in Q3 and Q4. That's the first point.

The second is, if you look at our FS portfolio, it's actually changing dramatically, right? We announced a $100 million account this quarter.

Probably this is the first $100 million account we have announced in FS probably over the last few years. It's very significant for us.

It indicates two things. It indicates that we are creating a very balanced portfolio in the financial services sector, number one.

Number two is that we are broadening our capabilities across the banking value chain, especially in the AI era. Look at the speed at which we got the $100 million account in the $100 million-plus account category in the BFS, actually speaks the point that I was talking about, how if you are on the AI value chain journey with customer, your ability to accelerate revenue will be much faster.

It was evident when you see this account got into $100 million-plus category at a faster pace that probably we have ever done in the history of LTM. That's how I sum

it up. When they say

Sorry, Rishi, go on.

Sorry, sir. I was trying to also ask is that when they say that there is still a long way to go in terms of reduction in tech vendor spend, you feel comfortable about not getting impacted out of that in the medium term?

No, we are not. In fact, we are going to get a benefit of it, while in parallel we'll create the balanced portfolio as I mentioned.

Absolutely no impact because the switchover from 50 vendors to five vendors is what the client is driving and the point that you're referring to. That switchover is a multi-year program.

You have to get that benefit over the multi-year program. It is not a statement made post this quarter.

It's a strategy that was decided last year. It was under execution and we're still under the execution of that.

Hence you see the growth as well.

Great, sir. Thank you.

The other question is, see, this is on capital allocation, right? If we look at all the peers which are bigger than us today give out almost 80% to 100% of their profits through dividend or in some cases buyback.

We are still around that 40% to 45% kind of range. We are sitting on 15,000 crore-plus kind of a cash.

Even after Randstad, the number probably will remain there at the pace at which you're adding or generating cash as well. Any thoughts in terms of trying to increase that and to enhance share value creation from that?

Rishi, I'll take up that question. I think in terms of what you say about the larger peers, that is correct, but the larger peers also have larger balance sheets and greater cash reserves.

I think we are balancing our growth plans and the payout as per the board directions and also the strategy that we have in place. We do look at increasing the payout ratio, and we have increased from around 40% to around 45% if you look at our payout ratio for last year.

We still believe that the strategy that we are following will require reinvestment in business through M&A and organic investments both. As far as the shareholder value creation is concerned, I would say that that has got two components to that.

One is the dividend payout, and one is the investment in the business, which will generate better returns for the future, and the value also comes from the long-term value creation through the share price movements as well. I think it has to be a balanced strategy between the two, and that's what we are trying to follow.

Yes, sir. I was just coming from the point that you're anyways generating 4,000 crores of cash every year.

Our historical track record has not been to do very large acquisitions. Unless we are looking at something of that sort relative to our size, the cash balance that we already have on the books is reasonably large, and so potentially makes case for a higher payout, which would potentially result in better valuation for the stock as well.

Point valid. I think that's been the endeavor within LTM, and you know that as part of the L&T Group, we are known for the shareholder value creation, we stick to those ethos and principles of it.

We're also looking for the opportunities on a very regular basis on investing in whether it's making some bets on AI is one area, like I spoke about GCC, I will share a lot more details in the coming days on the GCC business because that's requires a very focused attempt in terms of how we can capture the bigger market share of the customers who wants to come to India and set up GCC, and we're going to play a big role over there in partnership with some of our other capabilities that within the group have, for example, the facilities and the real estate part of it. Our BlueVerse investment will continue to evolve over the next couple of years because that's really strengthening and becoming a go-to-market channel for us in to meet our customers.

Third is our investments on the talent transformation also is happening at scale. Of course M&A is always something, as Vipul said, the door is open.

It's not that we just stop with one acquisition. We will look at the opportunities that will come our way.

It's just that we don't want to do it just to add revenue. It has to be clearly in a white space like what we did with Randstad, and it has to be brought at a price and a valuation that adds value to the shareholders.

Your point is valid, Rishi, but I just wanted to tell you that it's acknowledged and we follow a very good mature framework that is set by our group in managing the dividend as well.

All right. Thank you, sir.

All the best.

Thank you, Rishi.

Hello. I hope my voice is audible, right?

Yes, Soshovan.

Just on the AI for business contribution as a percentage of revenues, if you could possibly quantify that. Also on the margins because some of your peers have mentioned that it's much more margin accretive versus the traditional legacy business as such, right?

If you could possibly quantify that and the margin profile and possibly the tenure of these deals, are they just project-based 6 to 12 months or are you seeing that increasing? If you could just throw some color on that, that would be helpful.

Thank you.

Sure. Look, I think, as I mentioned, it's a 13.4% is the contribution of our AI revenue as part of the overall.

These projects are anywhere between 6 months to 1 year depending upon the area that you're involved in. There is also a lot of other downstream projects that you get, which is data modernization as an example, you might get something on the application remediation work that will come in as a downstream.

There'll be some application rationalization work that will come in. Leaving aside, the pure-play AI-native projects are just under 1 year kind of SOWs that will get started, but it'll get, as I said, iterative in nature.

The second point is that, yes, the margin profile at the gross margin level is definitely better than traditional services, right? We're also investing at the same time.

Look, we launched BlueVerse OneToken, which is our harnessing layer. I think we are one of the few companies amongst our competition to actually have our own token, we launched the BlueVerse OneToken, which is our own token to manage the AI spend of our customers.

Second is we've committed to build SLMs every quarter, we're building SLMs which are repeatable, accelerated codes that we can go and deploy it, so that we can make the deployment faster. If you don't build those assets, then you're really not at the forefront of AI deployment because AI deployments can't happen in a multi-year approach, specifically if you take it one specific process and start doing it.

The speed to market for an AI project should be faster as well. Some investment will be plowed back to strengthen our muscle in that area.

Over a period of time, I think it'll start flowing into the overall company margins as well. Vipul, is there anything to add?

I think that's covers it.

Thank you.

Thank you.

Thanks for the opportunity. Am I audible?

Girish, we can't hear you. Could you repeat that, please?

Hello, am I audible?

Yes, Girish.

Okay. A question on TCV.

A couple of your peers indicated that in the course of the last quarter, they saw some weakness towards end of the quarter, which led to deals being pushed out into Q3 and beyond. Did you see anything of that sort?

How would you describe demand environment in the last quarter vis-a-vis, say, three months back?

I couldn't hear you properly. I'm just trying to make out your question.

Is the question related to the GCC demand environment?

No, no. I'm talking about the TCV numbers.

A couple of your peers indicated that the

Sure, okay.

Hope I'm audible.

Yes, Karan.

Yeah. Venu, just one question on the consumer vertical.

The vertical has been flat this quarter, last quarter also it was down 1%. How are you seeing the growth in this vertical, and specifically how's the outlook on the travel vertical within this?

Yeah. Consumer segment grew 8.6% year-on-year basis, Karan, right?

It's been the business which has grown. Yes, sequentially, it has grown lesser than other market segment.

I think specifically, the travel and hospitality sector was impacted with all the fuel prices, energy prices that the crisis that unfolded. Most of these customers were tightening their budgets to manage those swings that happened on the fuel prices.

I think my assessment of this after talking to a lot of customers in that sector is that they are transforming big time in reimagining the experiences of the travel and hospitality sector. I expect them to come back and put all those budgets that were put on hold temporarily into these new areas.

What do you see in the last two quarters, specifically in the travel sector was attributed towards the fuel prices and thereby customers were doing projects, but they've just been very selective.

Got it, Venu. Just one more question to Vipul on the forex losses, how should we think about next two quarters?

Karan, I think we have been following a very consistent hedging policy over a long period of time. Our hedges, we follow the program of hedging out for the next 2, 3 years on a rolling basis and a layered hedging basis.

I guess similar kind of losses in terms of the forex losses below EBIT may continue for next couple of quarters. It all depends also on the rupee depreciation.

If the rupee depreciates more, that could increase. We get the concomitant benefit also in our business profitability.

Overall, I think our attempt has always been or the strategy has always been to maintain a consistent earnings profile over a longer period of time, and that is what we are following.

Got it. Thanks and all the best.

Thanks for the opportunity. Am I audible?

Okay. Venu, coming back to the TCV number, which was weakish in this particular quarter, a couple of your peers indicated that decision-making and deal closures were pushed back because of macro conditions.

Did you see anything like that for you? How would you describe demand conditions compared to, say, three months back overall?

Look, I think the macroeconomic conditions has been like this over the last 6 months or last two quarters or three quarters, there's nothing new that has actually happened this quarter, right? I wouldn't, at least I don't see that as an attribute.

It doesn't mean that macroeconomic conditions has changed dramatically towards the greener side. It has been the same as what it was last two quarters.

That's one. For us, as I said, that the TCV was the reflection of the kind of deals we went about, right?

If you have the sales organization and you pivot the sales teams to go after AI-centric deals and you incentivize them to sort of get an entry into this AI spend area, then we should expect that they will spend a good amount of their sales efforts in these kind of deals in that particular three months, and that's what we're doing. For AI-native deals, for example, we have a different sales incentive for our sales people because we want them to sell more of these deals.

It's a change management exercise as, right? There's a lot of comfort that you get if to sell the same thing that you've been selling over the years.

Hence we are making an effort by incentivizing sales people to sell the new AI-native deals. There are different sales commission structures for the solutions that we sell on the new-age partners.

Those are the things that, when you have the program driven like that, it gets reflected in the way you book your orders. That's how I see it and so for me, it's pleasing because it's important to be at the right area of the spend with the customer.

That's what is going to give us a long-term sustainability.

Okay. My last question is regarding pricing.

One of your largest peers, I would say the largest player in the market, talked about pricing weakening in the last quarter. Did you see anything like that for you or in the market itself?

Traditional deals are especially traditional large deals are been fought at a price point which to some extent becomes a bit unmanageable, if I may say. Yes, in those areas, the more you hold on to those areas, your pricing is only the unit pricing is only going to go down, right?

I'm not surprised about the fact that if we all observe the pricing weakness, it is going to happen in the traditional areas, and it was expected that it's going to happen. When you look at the newer areas that I spoke about, there is a premium attached to the skill set, right?

Our AI rate cards are priced higher than the traditional rate cards. We actually created AI rate cards and got AI rate cards signed up with customers, and that's got different things.

My belief is that if we have to transform, if you have to pivot, then we have to pivot hard. Right?

You can't hold everything and then trying to pivot. You have to pivot one area big, and we believe pivoting AI hard is the right thing for us.

That's where we build a scalable business and a very high growth business in the new business model as we go along.

If I may squeeze in one last question, this is regarding what you said in the analyst meet a few months back. You talked about deflation to the tune of some 25%.

Where do we think we are in the deflation cycle? Are we in the middle, towards the end, or probably at the beginning?

Are you talking industry or LTM?

I'm talking of industry. Even LTM.

It is.

Look, I think from our perspective, we said that some of the top accounts we went through that journey. I spoke about the top client in BFS.

We spoke about the top client of tech customer a couple of quarters back. That part of productivity headwind journey, we are done with it, right?

And 60% of the total sort of a adoption towards productivity headwinds we passed it on to the customers at different phases. With regard to the industry, look, it's very difficult to say the industry, but I can only say that in the industry, the traditional services will continue to be challenged.

Hence there has to be sense of urgency to reimagine, and which is what we are doing. With regard to the LTM, big clients, we are done with it.

Which essentially means probably 60%, 70% of our portfolios we are done with it. There will always be 20%, 30% of the portfolio, which will go through different renewal cycles, different consolidation cycle, and different AI infusion cycle, that will happen.

The material ones, we are done with it. I would expect, from an industry standpoint, this will go for a couple of years.

Anybody who can pivot to the faster newer area faster at scale will still deliver the growth like the way we're delivering growth.

Thank you.

No, thank you. Thank you for all the questions.

Appreciate you all joining the call. Thank you.