LTIMindtree Limited (LTIM.NS) Q2 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the LTIMindtree Limited Q2 FY '26 Earnings Call. [Operator Instructions] Please note that this call is being recorded. I now hand over the conference over to Mr. Vikas Jadhav, Head, Investor Relations at LTI Mindtree. Thank you, and over to you, sir.

Thanks, Inba. Good day, everyone, and welcome to LTIMindtree's Q2 FY '26 Earnings Conference Call. Today, we have with us on the call, Mr. Venu Lambu, Chief Executive Officer and Managing Director; and Mr. Vipul Chandra, Chief Financial Officer. We'll begin with a brief overview of the company's Q2 FY '26 performance, after which we'll open the floor for Q&A. 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 made on this call. I now turn the call over to Venu for his opening remarks.

Thank you, Vikas. Hello, everyone, and thank you for joining us on the call today. I'm pleased to share that Q2 FY '26 has been a strong quarter for us, marked by broad-based performance across our business. We are committed to becoming an AI-centric organization in the Agentic enterprise era. Our strategy remains on course, driven by sales transformation, Fit for Future program and focus on large deals. The results reflect disciplined execution and depth of our client relationships and solid progress in our ongoing transformation. Vipul and I will talk more about it during this call. Let me begin by sharing the headline numbers for Q2 FY '26. We reported revenues of USD 1.18 billion, reflecting sequential growth of 2.4% in constant currency terms and 2.3% in USD terms. EBIT margins expanded 160 basis points from 14.3% in Q1 to 15.9% ahead of our plan. Our order inflow stood at USD 1.59 billion, up 22% year-on-year, marking the fourth consecutive quarter of order inflow around USD 1.6 billion. We signed large deals in each of our 5 verticals. I would now like to highlight some of the noteworthy deals we won during the quarter. We secured a large deal with a leading global media and entertainment company to drive its digital transformation and enable an AI-centric delivery model. We've been selected as a strategic partner by a global financial institution to deliver end-to-end technology and consulting services across all its line of businesses, spanning multiple geographies, positioning as one of their 5 major service partners. We've been selected by global manufacturer of chemicals to oversee and execute their technology transformation in a rapidly evolving industry landscape. We will deploy our BlueVerse tech to drive AI efficiency and streamline processes for cost management and rapid innovation. We expanded our strategic partnership with a global hospitality major through a significant multiyear deal to accelerate their digital and guest loyalty transformation initiatives. We've been chosen by a leading fintech solution provider to deliver merchant certification services through an automation-first approach. We have won a contract from the Government of India's Central Board of Direct Access to transform India's PAN infrastructure. Our recent press release highlights the win in detail. We've been chosen as an AI partner by a global energy player to develop an agentic solution for legal and IT functions, leveraging BlueVerse foundry, our agentic ecosystem platform that has gained strong traction with our global customers. We were chosen by a global media and entertainment major to create a Gen AI-based solution designed to revolutionize both linear and nonlinear streaming platforms. By implementing an advanced AI-powered video metadata extraction system, we will unlock the intrinsic value within their entire catalog from classic library titles to new release assets. We were selected by a Europe-based life science company to lead a large-scale ERP transformation, reimagining all key business processes through an S/4HANA implementation. We have expanded our strategic engagement by winning a large deal with a technology major to drive cloud migration for the customer, enabling quicker time to market in a cost-effective way. These wins demonstrate our strong sales and delivery execution aligned with our changing expectation of our customers. Let me now share updates on our vertical and geography performance in USD terms. This is the second consecutive quarter of sequential growth across each vertical. The growth was led by consumer business, which grew 9.1% quarter-on-quarter. Healthcare, Life Sciences and Public Services reported strong growth of 10.2% quarter-on-quarter. Manufacturing and Resources experienced a growth of 1.7% Q-on-Q. BFSI grew 0.2% quarter-on-quarter and Technology, Media and Communication reported 0.1% growth quarter-on-quarter. From a geo perspective, Americas grew by 2.1%, Europe by 2.4% and rest of the world by 3.7% sequentially. It's worth noting that each of our client revenue pyramid categories saw an addition on a year-on-year basis. Our headcount at the end of Q2 FY '26 stood at 86,447. This reflects a net addition of 2,558 employees for the quarter, including 2,604 freshers. This quarter, we received several recognition. Let me highlight some key ones. We won 6 Gold and 2 Silver Brandon Hall Awards across various talent categories. We received a Gold Award for excellence in diversity, equity and inclusion strategy at the Financial Express HR Awards 2025. We were recognized as the leader in the application development services for AI application in the Peak Metrics Assessment 2025 by Everest Group. We were featured in the AI Consulting Services landscape Q3 2025 published by Forrester Group. Please refer to our fact sheet for a complete list of our recognitions. Let me now take you through some of the key business updates for this quarter. We welcomed Gururaj Deshpande as our Chief Delivery Officer. With over 30 years of experience in the large-scale IT delivery, Guru will play a pivotal role in enhancing client delivery, embedding AI into our delivery framework and driving operational excellence. We hosted our first executive partner conclave in California, U.S.A., a milestone event attended by senior executives from hyperscalers and strategic enterprise partners. This event strengthened our mutual collaboration in driving AI-centric solutions for our customers. We were awarded patents for 2 specific AI-centric innovation. The first one is method and system for managing financial well-being for customers, and the second is method and system for continuous clustering of SDLC artifacts. We launched our BlueVerse Studios in Mumbai and London, which will serve as a collaboration hubs for our clients' AI-led transformation. We partnered with Shopify to set up an AI commerce center of excellence to create industry accelerators. We introduced BlueVerse right Action, an AI governance framework that ensures compliant and intelligent decision-making by autonomous agents. We expanded adoption of the BlueVerse Success Metrics framework, a maturity and measurement framework now used by over 40 clients to convert AI vision into tangible business value. We developed an AI-powered quality engineering framework for a global real estate major, streamlining story refinement or automating test case generation. This resulted in a 60% productivity improvement. We embedded AI across IT operations for a utility major, including service desk, autonomous agents and monitoring. This resulted in significant cost saving, 4x ROI on AI investment, enhanced employee experience and IT resilience. We created a Gen AI platform for sports goods manufacturer that automated customs declaration using NLP and proactive error resolution. This improved compliance from 35% to 97%. We have more than 1,500 digital agents in action in addition to our workforce. To emphasize our reskilling program, we are pleased to share that over 80,000 employees have completed the GenAI foundation training program. This program equips them with vital skill for applying AI in their work. For financial updates, I will now hand over the call to Vipul.

Thank you, Venu. Good evening, everyone, and thank you for joining the call. Let me now walk you through the financial highlights for the second quarter of FY '26, starting with our revenue performance. Our Q2 revenue stood at USD 1,180 million, reflecting a growth of 2.3% quarter-on-quarter and 4.8% year-on-year in dollar terms. The corresponding constant currency growth was 2.4% quarter-on-quarter and 4.4% year-on-year. I'm pleased to highlight that our Q2 revenue in INR terms has crossed INR 10,000 crore mark and stood at INR 10, 394 crores. Our EBIT margin expanded by 160 basis points sequentially to 15.9% in Q2 FY '26. This increase was primarily driven by gains of 80 basis points from our margin improvement program, part of the Fit for Future initiative and nonrecurrence of visa cost. Forex tailwind contributed another 80 basis points. Profit after tax for the quarter stood at INR 1,381 crores as compared to INR 1,255 crores in the previous quarter, registering a growth of 10.1% quarter-on-quarter and 10.4% on a year-on-year basis. The effective tax rate for the quarter was 26.5% as compared to 27.3% in Q1. As mentioned previously, the higher ETR in Q1 was due to a onetime tax impact on account of capital repatriation from one of the subsidiaries. EPS was INR 47.2 for the quarter compared to INR 42.3 in Q1 FY '26. This is at an all-time high. Our total DSO for Q2 stood at 82 days versus 81 days in the last quarter. The operating cash flow to PAT ratio was 85.6%, up from 82.3% in Q1. The free cash flow to PAT ratio stood at 72.4% compared to 60.7% in Q1. Cash and investment balances stood at around USD 1.58 billion or INR 14,000 crores compared to INR 12,835 crores in Q1 FY '26. Return on equity for the quarter was at 21.8%. The Board of Directors has approved an interim dividend of INR 22 per equity share, an increase of 10% from the corresponding quarter of the previous year. As of September 30, 2025, our cash flow hedges stood at USD 4.11 billion and hedges on the balance sheet were USD 241 million. Our utilization, excluding trainees, remained flat at 88.1% during the quarter. For the quarter, our trailing 12-month attrition decreased to 14.2% compared to 14.4% in Q1. On the ESG front, our global sustainability report for FY '25 themed a tapestry of progress aligned with international standards and frameworks was released. This quarter, we strengthened our employee volunteering efforts in CSR by organizing activities such as plantation drives, literacy programs and initiatives supporting women in micro enterprise management. I'm pleased to share with you that LTIMindtree Bangalore Global City Office Phase 1 has been awarded LEED Platinum certification. This prestigious recognition is a testament to our commitment to sustainability and environmental responsibility. We have also been honored with the prestigious Golden Peacock Award for Risk Management in 2025. This recognition is a result of our continued commitment to industry best practices and aligning risk management to strategic goals. I will now hand it back to Venu for the business outlook.

Thank you, Vipul. In summary, our strong performance this quarter demonstrates our team's unwavering commitment and deep trust our customers continue to have in us. As we look ahead, we remain confident in our ability to sustain this momentum of profitable growth, driven by strong deal wins, execution rigor, strategic transformation and investments in AI. Before we proceed with the Q&A session, I would like to wish you and your family a very happy Diwali. With that, let me now open the floor for questions.

[Operator Instructions] We take the first question from Sandeep Shah of Equirus Securities.

Can you hear me?

Yes, Sandeep.

Congratulations on a very strong execution, both on revenue and EBIT margin. Venu, first question is, if I look at the top 5 client bucket, the growth seems slightly tepid. And a related question is looking at the top 2 clients, one in high-tech and one being BFSI, do you foresee any long-term concern as these clients may pause -- or face a hurdle in terms of your overall growth journey for a medium to long term?

Yes. Thanks for the question, Sandeep. Look, I think if you look at it across all our client buckets, we have actually grown. And as you rightly called out, the top 5 accounts had a different number. But there is a reason for it. It's not related to the outlook or a demand. I think these are the top 5 large engagements we have. And these are the large accounts, which is going through recalibration because of the AI productivity benefit that they get. So we will have to transition that phase. And at the same time, we should -- whatever the revenue we add, to some extent, it gets offset by the AI productivity as we transition this phase. But once we are done through this phase, there is no reason why we can't grow in the top 5 clients, right? So I don't see any structural issue, not a material reason to be worried about in that particular segment. I think it is just the transition phase that we are going through in these 5 accounts, which is natural, I guess, expected with the opportunity that exists in AI. And those things get supplied when the renewal comes or any other existing engagements we may have. So you'll have to look at slightly in a larger context on that. But I would look at this as more as a transitionary phase.

Okay. And just a related question, last time for the BFSI growth prospects, you were sounding slightly cautious. So is the outlook remains same or you become slightly more positive? And looking at your deal wins and some support from the pass-through sales, even looks like the second half growth momentum could be better. And the last question in terms of EBIT margin, there is a significant improvement. So where we are currently in the near term, where could be the trajectory? And on medium to longer term, can we go to high teens? We are already at 16%, can it be even higher teens in next 3 to 4 years?

Yes. Look, I think with regard to the BFSI, there are 2 points I would like to call out, right? So one is in the BFSI segment, we sort of entered the year at the back of a very strong year in FY '25, right? So we need to look at that phase, I actually call that as a preproductivity era phase, right? So coming back at the back of that growth. And then as I spoke about, there is a recalibration happening at the time of renewals, which would offset some of the growth that we would get in the form of new engagements and new deals. That's exactly what's happening in BFSI space. It's nothing to do with the market outlook being cautious or not. I think it is just the phase that I explained on the top 5 -- the commentary I made with regard to the top 5 clients would sort of apply there. So I still remain -- I remain optimistic about the growth in the BFSI space as we go into the second half. And in terms of the overall growth for the second half, yes, absolutely, that's the endeavor, right? And I think I made this comment in the Q1 commentary, probably not in the earnings call, but the post earnings call and other interaction that our plan is to be nearer to the double digit in the second half of the year at some point. That's what we are working on. So that won't change. On EBIT, I'll request Vipul to give a comment, but I would expect that also to have a similar commentary.

Sure, Venu. And thanks for the question. I think in terms of the EBIT outlook, we remain confident in terms of being able to expand our EBIT margins as we go forward. We don't give out a specific EBIT guidance for medium term. So I'll refrain from doing that. But I think we are on a good profitable growth trajectory, and we remain confident to be able to maintain that.

We take our next question from Manik Taneja of Axis Capital.

Congratulations for the very steady performance that you've shown in the current quarter. You did allude to some pressure within your top customers. But given some of the large deal wins that we have won in the recent past and some of the pass-through revenues that typically tends to come through in second half, do you think the strength that we see in second half of FY '26 may be higher than what we have historically seen? That's question number one. The second question is with regards to wage hikes for your staff and also in terms of further gains from the Fit for Future program, how should we be thinking about them both for the near term and the medium term?

Sure. Thanks, Manik. Look, I think with regard to the commentary on H2, I think I made in the earlier question as well, we remain optimistic and confident about delivering and continuing the same growth momentum in the second half. And if we have to deliver to the near double digit at some point in second half, obviously, we expect the growth to be slightly higher than what we had in Q2 as we look beyond the Q2. So that's the plan we are working on it, and I'm fairly confident about the path that we take there. With regard to the wage hikes, we did announce the wage hikes to our employees in our Town Hall today. And the way we are going to approach is -- and before I share the approach, let me just take 30 seconds and give you a context on how we see the topic of wage hikes evolving. See, I think we are going through a very significant inflection point in the industry and also within our company. And there is a lot of opportunities on the other side of the inflection point. So it's very important that we navigate this journey collectively with our employees. And one of the critical aspects of the traveling together with our employees is about how we cross-skill and upskill our employees to the next AI requirement or AI projects that keeps coming to us. So in the Agentic AI era, the skill becomes a very critical element of that. So we're going to take our employees along that skilling program, and that's already in progress and that will continue to accelerate. So we have fixed 2 milestones on how we address the wage hike. And my personal view is that, that may be the new normal going forward as well. We may not have a one wage hike in one particular quarter for a whole of employees. We might spread it. So this time, we are making a beginning. We will have wage hike spread over 2 quarters. The first tranche will be in the effective 1st of January, and the second one will be in the 1st of April. And I would expect that we will have to adjust to the new normal that we will have 2 stages of increments coming in for our employee base. You can assume that 50% in January 1 and 50% of our employees in the April 1. I think on the Fit for Future gates, Vipul commented on the earlier question, where we are optimistic about continuing our margin momentum, and those gains are a very critical piece towards those goals. So -- and that's going very well for us. And you saw that in our Q1 result, you saw that in our Q2 results, and that will start getting reflected even in Q3 and beyond.

If you could talk about some of those margin tracks, Vipul, given historically, we used to talk about some of the G&A rationalization when the merger happened. If you could help us understand what are those margin levers or the cost levers that you're working on and which you expect to essentially see more tangible benefits?

So I think we spoke about some of these levers earlier also. And I think this Fit for Future program or the margin focus remains a continuing focus area for us. And there are multiple levers in this program, but let me just touch upon a few of them that we are looking at. One is the productivity lever aided by AI adoption. And as Venu talked about, we have been adding revenue in our -- in this year without really having a significant addition to our headcount. The second point -- the second lever which we are working on is pyramid correction towards which our commitment for the fresher hiring program is continuing. And as we go along in the year, that will start reflecting in our pyramid as well. We are also working on our span of control internally, and we believe that there is more scope to do on this. And overhead also, while we have reduced versus the beginning of the year, we still think there is more scope as well in that also. So there are multiple levers, and this is a continuing exercise.

Our next question is from Vibhor Singhal of Nuvama Equities.

Congrats on a solid performance team. I got 2 questions, one for and one for Vipul and one for Venu. So my question, Venu, for you was on the, let's say, the growth momentum that we are looking at. So first of all, I think I would -- what I would want to check is that I think we have 2 large deals, which should probably be ramping up at some point of time. So is it correct to assume that the PAN 2.0 deal should start ramping up in Q3 and the recent media deal that we have won should start ramping up in Q4?

Yes. See the PA 2.0, the early ramp-up has started just about. Yes, you're right. You can expect that to ramp up in Q3. But the media large deal, I think it will take a slightly longer time because it has got a very extended transition period. It's a deal where the existing scope plus the new incremental scope are getting recalibrated and reconsolidated. That's how we're redefining the entire IT landscape over there. And for that, there is a transition with multiple vendors that needs to be done. So I would expect the media ramp-up -- media account ramp-up to be over a period of a couple of quarters.

Got it. Got it. You also alluded to maybe possibly touching a double-digit growth in terms of CC growth at some point of time in this year. Does that basically still hold? And the recent deal wins and the growth in this quarter, does that align with the target that you're looking at?

Yes. Yes. I think as I said, we want to be nearer to the double digit or double digit. There's always that bit of a leeway we kept to see how things unfold. But the idea is that can we come closer to the double digit or actually get to the double digit. That plan is pretty much still in progress.

In FY '26? You mean to say in the remaining 2 quarters?

Yes, yes. At some point in the second half of the year, we will have that growth coming in. And I think I clarified it in the last calls as well that we're looking at that in the USD terms.

Got it. Vipul, just one question on the margin side. I think this quarter, we saw a very sharp reduction in SG&A from 12.8% of revenue, it's come down to 11.7%, so almost 100 basis point benefit from that. So first of all, is that sustainable? And secondly, is there more room for this to come down in the Fit for Future program that we are running?

So Vibhor, 2 points or -- 2 parts to that answer. One is in Q1, there is normally a seasonal pickup in the SG&A cost because of certain marketing events, et cetera, which typically come seasonally in that quarter. Those were not there in this quarter. Number two, as I just said that the Fit for Future program is a continuing program, and there are further levers that we are working on. So we are working on improving even this parameter further.

[Operator Instructions] We take the next question from Varun Saboo from Anand Rathi.

Sushovon here from Anand Rathi. Congratulations on a fantastic set of numbers. Just one question. Specifically, when we are looking at almost 60% of your revenues, which are coming from 2 sectors, that has been basically flat. How do you see that evolving over the [year], there is any client-specific issues that are there? And the other bit is, do you see a structural change in your vertical mix over a period of time? I have another question, but I'll just wait for your answer.

I think Varun, I would sort of link it to the -- I would link it to even the top 5 commentary to this answer as well because obviously, if you look at it in the top 5 client base, I spoke about recalibration at the back of productivity that's happening. So there's one element of it because that also has accounts which falls into this 60% segment that you've called out. So that is one. And second thing is that the commentary I made with regard to the BFSI is that we're coming at the back of the strong growth last year. And then we had the renewal cycle coming in, which sort of led to this recalibration. And I expect that, that will improve as we go along over the next 2 quarters. But with regard to the tech verticals, I'll just call out because that comes under the 60% thing that you spoke of. I look at that segment in 2 eras, right? So same time last year, we were on what I actually call as a preproductivity era, right? So that's when the AI adoption and all that conversation just started and then the acceleration happened about the productivity gain that we passed it on to a few customers that you know about, which we made a commentary last year. So post-productivity era is what I would suggest -- I would sort of look at it starting from Q3 onwards. And in the post-productivity era, we should start seeing the growth because it's not fair to compare the year-on-year on that segment, the preproductivity era because the things did change. The price points did change, the renewal recalibration happened. We passed on the benefit to the customer as well at that time. Now the thing is we are seeing growth in all these segments in the 60% of the segments that you called out. We have a good pipeline traction. In fact, if you look at the order booking in our BFSI was significant. It contributed materially for our 1.59 billion of order booking. So that's how I would summarize it, Varun (sic) [Sushovon]

Just one more question. Do you see the productivity-related benefits to be more specific to BFSI and high-tech and possibly manufacturing, retail, it is comparatively lesser? Or is that something that I'm construing basis what I'm seeing as such from a sectoral perspective?

Well, the way I would look at it is that the larger the engagement, the larger the account size, the impact is more material, right? So that's how we would say. But AI infusion is what we want to encourage across all our customers, across all our segments and all our customers, right? We have increased it more than 40, 50 accounts adopting AI in this quarter, as I covered in my initial commentary. So that's how it works. I think it's just the size and scale of the account and segment where you start seeing that impact materially.

We will now move to our next participant. That's Debashish Mazumdar of SVAN Investments.

Congrats on good set of numbers. Sir, my first question was around the deal wins. So for the past almost say, 3, 4 quarters, the deal wins have been in a similar range, but our top line growth has been steady or we have started to see some acceleration there. So how should I link these 2 things, both of them -- so I could have some flavor around the deal wins also. And how should I relate both these things?

Yes. So there are 3 attributes if you want -- in the topic of relating the order booking to the revenue, right? Firstly, we have shown quarter-to-quarter progress, right? I mean that's a reflection of the order booking translating into the revenue. But we need to understand that the order booking has 3 factors. The one is what is the transition period for these large deals before it sort of materializes into steady-state revenue. And as an example, I called out the media customer. It has a longer transition period. The one which we announced in Q1, that has already been transitioned, right? So we're getting into a steady state, so we'll start seeing the revenue coming in. So each of these deals have a different characteristics in terms of how -- what is the transition period and how much it sort of ramps up. And the second thing is that the renewal deals are getting clubbed with the vendor consolidation deals, right? Even the recent large deal that we announced, it's a great case study of our existing scope plus taking over the scope of the other vendors through the vendor consolidation strategy makes the deal bigger. And when you look at that, the vendor consolidation is over a multiyear period because you consolidate 2 vendors, then you move to the third vendor and fourth vendor. So that's how the second attribute of it. And the third is some of our renewal deals gets recalibrated to a new price point as we go along. So that's how we have to look at it. The only summary I would leave it is that, look, we are fairly confident of where we are going in the second half of the year, and we have enough momentum that's backing us up on that.

Understood. Understood. And sir, my second question was specifically the commentary you just alluded to of the large customers having the impact of AI. So you have been talking about that even in the calls before and the other players or peers in the industry have been talking about change of scope in the larger player. So I just wanted to understand, does it have to do a lot more to do with macro specifically that these deals are getting or the existing book of work is also under pressure? Or it is to do more with AI?

So I think it's more to do with AI. The macro was probably a couple of quarters back that would have been triggered. But now AI, if we encourage our customers to leverage AI in the engagements. We actually proactively champion the partnership of AI infusion in our existing use. I don't think we've gained anything by holding into that. It's -- the right strategy is to let go what is right productivity gain to our customers because we win back more. We win back more compared to what we give. It is just that it's a transitionary phase, and we have to look at what is the scale of growth that comes in over a period of time. And we are seeing that in our accounts. You see that in our results. While we have passed on the productivity benefit, we still grew.

Understood. Understood, sir. So just a continuation on that part, a clarification. So could you quantify some sort of AI revenues? Or has it reached to a monetization phase for us? And some levels of revenue streams or percentage would you be able to guide us to?

At the moment, we are not because there is a pure-play AI native services that we do on the BlueVerse Agentic system. But there are a lot of other service lines which contribute towards driving the AI solutions, whether it's our cloud business, our digital engineering business, data, most importantly and so on. So until we come to a point where we can come with a much sharper definition of what is AI revenue, I think it will be a bit premature to start calling it out.

We'll take our next question from Sulabh Govila of Morgan Stanley.

Am I audible?

Yes, Sulabh.

Congrats on a strong quarter. My first question is on the deal wins and the pipeline. So in the last 2 quarters, we've had 2 mega deals in the ballpark range of, let's say, $500 million each. So with respect to the current pipeline, would you characterize the current pipeline in having similar such size deals, which we are confident of closing in the near term? Or would you say that even without those, we'll be able to maintain the level of deal wins that we've been doing?

Look, I think there will be some seasonal movements here and there depending on the deal cycle that it takes to close deals. But as we -- looking at continuing our growth momentum and reaching to that number that I spoke of at some time in the second half, I would look forward to having the continued deal momentum, right? I just don't box it to a specific number at this moment. But we have a robust pipeline, fantastic deals in discussions with our customer. That's how we will go out. And just to clarify to your point, we did not announce the deal size on the second deal that you mentioned because the client has requested us to maintain the confidentiality. So I'm just calling that out. So that's -- the silence should not be seen as an acknowledgment of the deal value. So we did not call that out. And also the deal that we announced recently is a great testimonial of a combination of our existing scope and the new scope. And that's what we will see more and more in our existing accounts while we go after the new accounts with the newer deals as well.

Understood. Understood. And my second question is on the margins. The benefit on margins from levers such as productivity driven by infusion of AI. Historically, whatever margin benefits the industry has seen, they found ways to pass it back to clients. And particularly on levers like these, which is where the effort is getting reduced. Would you say there's something different this time around where such benefits can be retained by the IT vendors?

Well, it depends on the type of engagement, right? Our EBIT momentum is not just based on the AI productivity. It has got multiple factors, as Vipul explained earlier. But when it comes to the AI productivity, things like managed services, fixed price project, the development capacity-based engagements, these are engagements where we have an opportunity to keep the part of it, if not full, of the productivity towards us. Yes, that's how I see it. But that's not the only lever. That's one of the levers. That's not the only lever.

Okay. Understood. And just the last bit, from a third quarter perspective, I just wanted to check, given that the wage hikes are now coming in from the fourth quarter, do you have any headwinds going into the third quarter from a margin standpoint apart from the lower margin pass-through revenues that would come in?

So I think the seasonal headwinds, which are always there in terms of furloughs, et cetera, those are going to be there, but we still remain confident of being able to expand our margin further. So I don't think we are expecting anything so substantial, which can delay us right now. But that's where we stay confident on.

We now move to our next question. That's from Ravi Menon of Macquarie.

Two questions. One, this deal that we signed with this media major, I thought that it was in October -- early October. So is that included in the TCV? And if it is, I mean, why was it included? Was it signed before the September 30?

Sorry, you're talking about the deal that we announced -- Sorry, Ravi, could you come again, please, on that?

Yes, the deal that you announced, I think, early October, has that been included in this deal TCV?

Yes, it is included.

So how come? Because typically, we would include only things signed up to September 30, right?

Yes, it was signed in September. We announced it later on.

Okay. All right. Perfect.

Announcement has to go through a lot of approval process with client. So when it got -- when they say this is the effective date of the contract, and this is the approval date for the announcement, that's when we do because a lot of these deals have their own clients' own regulatory approval process as well. So we'll have to wait until that thing that gets done. So we had an agreement and signed contract in September.

And apart from your top 5 clients, it looks like every other segment is actually growing pretty well. So should we think about this top 5 as really being in that transition phase of productivity as you put it, and others will still have to see that kick in. The smaller customers will see this come in at a later stage?

Well, the other segments are actually growing. So I'm not sure what -- which part is the later stage of it. If you look at our 6 to 10 clients -- sorry.

Yes. What I meant was, will we see a similar pressure from productivity at a later stage with the top 6 to 10, top 11 to 20 and so on?

Look, it is not going to be on a sequential basis that the top 5 first finishes and then the sixth and 10th comes later on in the queue. It doesn't work like that because most of these clients are already in discussion on productivity, right? Everybody wants productivity here and now. It is just that I said, larger the engagement, larger the account, you see the impact being material. But we are in very constructive discussion and in fact, a proactive evangelizing AI productivity across all our customers. And it's a sort of a parallel approach, Ravi. It's not sequential.

Understood. And one last question. We've now seen you win fairly large deals. I think that was the whole thesis behind the merger of LTI and Mindtree and looks like that's playing out. But how about the legacy modernization side? And are you in a good position to compete against incumbent vendors there?

Yes. Look, I think merger was 3 years back. I think we should move on from that point in my view, right? Because the market has changed, the capabilities that clients want are different than what it was 3 years back. And also, the decision-making parameters to award a large deal also has fundamentally changed. So we are sort of playing out in a -- we have a new playbook now, which sort of suits into the new market segment that we're addressing. The same customers, but with the new expectations is what we are addressing. So I would sort of look at it is that most of these large deals are coming at the back of vendor consolidation and also having a strategy of creating an AI road map. Along with that, of course, you modernize technology, you modernize data, you modernize infrastructure and so on. So that's how I look at it.

We take our next question from Sudheer Guntupalli from Kotak Mahindra AMC.

Congrats on a good quarter. So just on this productivity issue, if I remember it right, I think we had gone through a couple of back-to-back quarters where we had seen stress because of this productivity issue in the top account. And then we called out that, that issue was completely behind. Now we are talking about this productivity pass-on issue again. Just trying to get some clarity whether this is a new issue in the same account or this was the overhang related to the same productivity pass-on thing that has started 3, 4 quarters back, it is still continuing. So any further clarity on this?

Yes, sure, Sudheer. Look, firstly, on the top client, I think we said -- we informed this in Q4 that the productivity commitments that we did to the top client is done. So that topic is closed. I think my commentary with regard to the productivity is the new landscape in the market. I actually don't see this as an issue, honestly, as long as we continue to grow, right? Because this is not -- well, this is an issue in terms of how much growth you can challenge in general for the industry, but productivity is a new normal. It's a new normal until everybody transition into a new post-productivity era on the existing book of business. So it's going to take a different phased approach for different customers. Somebody would go much faster. Somebody would go in a phased approach. So that's how I would say. So I don't think it's related to the top account at all. In fact, we grew in this quarter in top account. So sequentially, we grew in this quarter. So I don't think that's really issue. I hope that answers the question, Sudheer.

Okay. So what you might be referring to is maybe the other 4 accounts where you would have seen some productivity pass-on issue and not related to the high-tech top account. Is that the correct understanding?

Yes. I think I was answering in the context of top 5 clients having a different growth trajectory than the sixth and onwards. So it was more related to the top 5 customers because any larger engagement, larger productivity initiative is a material impact for that particular period.

Understood, sir. And lastly, you're sounding very confident that we'll reach double-digit kind of growth rate sometime in the second half. But given that we also have sizable exposure to BFSI and high-tech, where we see significant amount of furloughs and very similar thing has played out a couple of years back. So any sense on how the furloughs this time is going to be and why we are confident despite the impact of that furloughs?

Look, I think the furloughs is going to be normal as what it always happens to be here. So we don't see any signs of increasing it. But absolutely, yes, there's a seasonal furloughs, it has been factored in. When I made the comment about nearer to the double digit sometime in second half, the furloughs has been accounted for.

Our next question is from Sumeet Jain of CLSA.

Most of my questions are answered. I just had one question. You are operating at a very high utilization of 88%, and you obviously have certain large deals to ramp up. So can you throw some light how are you planning the headcount around it? And in case you need any skill mismatches there, will you be relying on subcontractors the way we saw this quarter?

Yes, Sumeet. I think in terms of the utilization levels, yes, you're right that it is slightly elevated. And we are working on getting it into a more comfortable zone as we had called out earlier also between 86% to 87%. I think our fresher hiring program that we are remaining committed to and under which we hired more than 2,600 freshers in this quarter, will start playing out once they get trained and they start getting deployed, and we are continuing to remain committed to hiring more freshers as well. So overall, we are working towards adjusting this along with our pyramid adjustment as we go along. As far as -- sorry, what was the second part of your question? Yes. On the subcon side...

I mean will you be relying on subcontract, yes.

Yes. So it is a function of how the deals are coming in, how quickly they have to get ramped up. And if we have to rely upon subcons for the initial ramp-ups, et cetera, that's one way to do the ramp-up faster. And yes, we will be looking at that as well as a lever for maintaining the growth.

Right. And Venu maybe just harping upon the same point on top 5 accounts or rather not the top, but the remaining 4 accounts or, let's say, in BFSI or high-tech verticals. How long do you see this transitory phase to be there where the AI productivity benefits have to be kept on passing. So your double-digit growth outlook or rather ambition by second half, I'm sure is independent of growth in these 2 verticals. So can you throw some light on how long is this transitory period in your view?

Yes. Firstly, I think I hope you all acknowledge that the other portfolios are growing beyond the industry average, right? In fact, much higher than the industry growth, right, which adds up to a good well-balanced portfolio, right? There is also a strategy of making sure that we have a well-balanced portfolio because a few times, you all have asked that are we dependent on a few accounts a lot. So I see this as also a transitionary phase for us where we end up creating a much more balanced portfolio. So that's one overarching commentary I want to make because if you look at it, most of the large deals that we got are outside of the top 5. So that's another great example to say how you bring more balanced portfolio. Now coming very specific to the period of transitionary phase, there is no one specific time line for, let's say, 3 or 4 accounts. Each of them are going through its own time line, but I don't expect this to be a very long phase. You can expect the progress happening from Q3, Q4 onwards, right? It will -- each of them will grow in a different proportion. So some of them will take long time. But as I said, I would urge you to look at overall portfolio and look at what we are doing in terms of balancing the portfolio right to reduce the risk and especially to address the concentration risk where some of you have spoken quite a few times with me. That's where I would leave it. I hope that answers your question, Sumeet.

No, definitely, definitely. I think congrats on a great quarter and great deal wins and a great ramp-up going ahead.

We take the next question from Dipesh Mehta of Emkay Global.

A couple of questions. So I think 3 questions. So first is about, let's say, we are indicating about double-digit growth entering into H2. Considering the deal pipeline and overall strong momentum what we are observing, whether it would set the base for FY '27 kind of expectation? That is question one. Second question is about the net new portion in H1, whether it is different than the, let's say, last 4, 6 quarter what we observed in terms of net new in overall deal intake versus the past. Third question is about noncontrolling interest. This quarter, it seems to be much higher than usual pattern. If you can provide some sense what led to that jump? And last, if I can add more, is more medium term. If you can give some sense about AI adoption across our top clients? And what kind of impact you have observed -- impact of AI on renewal?

Yes. What was the third question, Dipesh, if you can repeat that once again?

Noncontrolling interest. If I look in P&L, it is around INR 20-odd crores, which used to be a very small number only.

Okay. I'll let Vipul to answer that, but let me take the other question. Look, I think FY '27 is still some time away to comment. So let's hold on to that. There is one big thing that we have to deliver is continue this momentum for the second half of the year and make sure that we come very, very close to the double digit at some time in the second half of the year. So that's how I look at it. I think it's too premature to comment on FY '27. So let's talk sometime in either January kind of time frame where I will be in a better position to comment on FY '27. I think the new deal -- most of the deals, if you look at it is coming in, in leveraging our existing scope, doing the vendor consolidation in our existing customer base. And then we also announced one net new account in Q1, which was one of the large deals that we announced. So we have a combination of both. We spoke about large deals across all our 5 verticals. If you look at all these 5 verticals, we have done some work with those customers at some part of the engagement life cycle. So that's how we sort of done that. AI in top clients -- sorry, I lost the chain of question on that. What was the specific question, Dipesh, on AI and top clients?

So I just want to get sense on AI adoption across our top client because you indicated 40, 50 client in one of your earlier comments. And any -- its impact on renewal, how the size and scope changes?

Yes. See, AI infusion is something we are proactively driving it within the company. We have a framework called Adapt framework, which measures the skill sets in the account, the AI adoption maturity at different phases of it. In some accounts, we are doing an AI in the form of an agent where you're assisting the humans. So there, it's not much about cost impact. There it would be more about how do you make employees work more effectively? How do you service customer more effectively, right? So that's one form of AI infusion. The second is we are doing AI infusion in another category of accounts where we can make -- we can do more work with the same team. That means you actually get more revenue, keeping the same cost if it's a fixed price kind of a project. The third one is that where we have a discussion with the customer to drive more productivity so that we can pass on that benefit to the customer. So when I talk about AI infusion, doesn't necessarily mean that I pass everything to the customer and also doesn't always mean that it's always related to the productivity. AI has multifaceted impact into the engagement. It goes -- it goes beyond productivity. So that's what we are driving, and we are pretty excited about that adoption across our customers. With regard to the noncontrolling interest, Vipul will answer that.

Sure. So I think the answer to that question is that until last quarter, we were accounting for this entity that we had set up in partnership with Aramco as a joint venture and equity method consolidation. During this quarter, there have been certain changes in the partnership arrangement between us, which now has allowed us to consolidate the subsidiary on a full line-by-line consolidation basis. So going forward, this will be a full line-by-line consolidation. Hope that answers the question.

Yes, it does.

We will take our last question from Sandeep Shah of Equirus Securities.

Just Venu, sorry to stress again on top 5. In terms of this process of AI calibration and the renewal where productivity gains are passed on, do you believe we are not losing wallet share because such process could be intensely competitive where apart from an existing, there are other vendors are also being invited because these are named Fortune 500 clients. So is it fair to assume our wallet share continues to remain defensive and not at a risk.

Yes. Firstly, on the top 5 commentary I made, just look at it in the right context, right? I mean we are talking about the top 5 growing at minus 5%, right? So if you look at the overall, it's not that material when I look at the overall balance portfolio. I gave you a reason why it is happening because if you're just passing on the productivity benefit, you don't just degrow at minus 5%. It will be much higher. That means we are actually doing more business, but it is getting offset by the transitionary phase that we are going through some of these customers. Hence, you see that impact, right? So that's how you need to look at it. The second thing is that, look, these are the customers where we have relationship more than 10 years, some of them more than 15, 20 years. So we have deep relationships. So I absolutely don't see this as a red flag. If we can help our customers to transition this phase successfully, there is a lot waiting for us on the other end. In fact, we are winning the deals in the same accounts. And it will start reflecting, as I mentioned, in different phases over the next few quarters, how these accounts will reflect as a net positive. That's how I look at it. So...

Okay. And the last question, Vipul, sir, though there is an improvement in FCF to PAT ratio, but with our scale now closer to some of the other large caps and margin increasing, can we go to industry standard of 90% to 100% FCF to PAT?

I think the answer to that is that the OCF to PAT, if you look at it, that should be closer to 90% to 100%, I would say. The FCF is a function of also how much of investments we are making in our capital expenditure side, which we have talked about in the last couple of quarters that we are continuing to invest in our facilities expansion and also developing and modernizing our IT infrastructure internally, and that investment is going to continue. So I think we are still investing in our business. And to that extent, the FCF to PAT ratio will probably remain where it is. And gradually, it will start moving up once we start coming to the desired capacity levels of the facilities.

Thank you. Ladies and gentlemen, on behalf of LTIMindtree Limited, that concludes today's conference. Thank you for joining us, and you may now click on the leave icon to exit the meeting. Thank you all for your participation.