| LTIMindtree Limited | ||||||
| Ratings reaffirmed at 'Crisil AAA/Stable/Crisil A1+' | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings has reaffirmed its ‘Crisil AAA/Stable/Crisil A1+’ ratings on the bank facilities of LTIMindtree Ltd (LTIM). Crisil Ratings has also withdrawn its rating on Rs 83.25 crore of bank facilities at the company’s request on receipt of No Dues and No Objection Certificates from the lenders. The rating action is in line with the Crisil Ratings policy on withdrawal of ratings.
The ratings continue to reflect the strong operational profile of the company, being the sixth largest IT (information technology) services player in India. With reported consolidated revenue of Rs 35,517 crore and operating margins of 18% in fiscal 2024, LTIM continues to demonstrate a strong operating profile; and revenue grew on-year 7% in the first nine months of fiscal 2025 to Rs 28,236 crore vis-a-vis Rs 26,624 crore in the previous corresponding fiscal. Revenue growth has remained slow in the last couple of years due to the prolonged macro-economic challenges. The operating margin stood slightly lower at 17.35% in the first nine months of FY25 as against 18.22% in the previous corresponding period due to the wage hikes on a relatively high base of employees amid seasonal furloughs. The company has also secured its highest ever deal wins during the third quarter of this fiscal of USD 1.7 bn supporting the revenue visibility across near-medium term. Further, the company’s business risk profile should also benefit from its AI first approach as it continues to make progress on transitioning to AI based industry requirements. Over the medium term, the margin should benefit from improvement in revenue growth through better absorption of costs and better operating leverage. Crisil Ratings believes that the revenue is expected to grow in low-mid single digits in FY26 with continued healthy deal wins despite macro-economic headwinds; driven by improved cross-sell, up-sell, mining of large clients across end-user industries and greater ability to bid for large deals.
Financial risk profile is backed by a strong networth of Rs 21,295 crore as on December 31, 2024, and low debt profile constituting mainly of lease liabilities Rs 2,370 crore also aided by a healthy cash-generating ability and robust liquidity. LTIM also benefits from the L&T brand. These strengths are partially offset by customer and geographical concentration in revenue and exposure to intense competition in the IT services industry in India.
The ratings also reflect the strategic focus of the parent, Larsen & Toubro Ltd, on the service business. Over the years, the contribution of the service business, both in terms of revenue and profitability, has been improving. L&T has also been leveraging the capabilities of the services segment to augment its core business. The merger of L&T Infotech with Mindtree in 2022 bodes well for the IT business in general and the services segment in particular. |
Analytical Approach Crisil Ratings has combined the business and financial risk profiles of LTIM and its subsidiaries, held directly or indirectly, as all the entities have common management and are in the same business.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Healthy operational size; sixth largest IT player in India LTIM ranks sixth position among the IT companies in India. The combined entity has enhanced scale, diversified technical capabilities, and product offerings with presence across end-user industries, geographies, and customers. The company has an enhanced and established market position in key end-user industries and benefits from sound operating efficiency. It earned 36.4% of its revenue from banking, financial services & insurance (BFSI); 23.7% from technology, media & communication; 19.3% from manufacturing and resources; 14.3% from consumer business and the remaining 6.3% from health, life sciences in the third quarter of fiscal 2025. The company has also recorded its highest ever deal signing in Q3 of FY25 with a total contract value of USD 1.7 bn across verticals which provide strong growth visibility for the medium term. The number of active clients increased to 742 on Dec 31, 2024. Faster growth in digital areas and client additions have gradually reduced dependence on the top 5, 10 and 20 clients over the past 4-5 years. Healthy operating profitability of more than 17-18% over the past fiscals has led to a robust return on capital employed (RoCE) of more than 25%.
Strong financial risk profile This is reflected in sizeable networth of Rs 21,295 crore as on December 31, 2024, healthy cash generated from operations, and robust liquidity (Rs 12,488 crore). The company does not expect to undertake any large, debt-funded capital expenditure programme or acquisition over the medium term. Annual capex plans are expected to be funded through internal accrual. With significant cash surplus and minimum reliance on debt, capital structure is expected to remain stable.
Strategic importance to the parent, L&T LTIM also benefits from the strong brand and domain expertise of the L&T group, resulting in better market penetration and acceptability. The IT services business is critical for the L&T group
Weaknesses: Customer and geographical concentration in revenue North America has consistently contributed over 70% to the total revenue of LTIM, and any regulatory changes in the region could have a significant impact on operations. Protectionist measures adopted by the US may also pose a challenge for Indian IT companies. However, this is an inherent feature of major IT entities as a significant portion of the revenue originates from the US.
Exposure to intense competition The business environment for the IT industry continues to be challenging. IT players in India will need to consistently scale up operations on account of intense competition, both from domestic and multinational corporations that are expanding their offshore operations in India. The other challenges include maintaining an efficient cost structure, ensuring effective labour retention and utilisation and remaining responsive to the dynamic nature of the industry. More and more companies are intensifying focus on the digital technology space, resulting in increased competitive intensity. Hence, the ability to provide differentiated services will remain critical to maintaining a competitive advantage. |
Liquidity: Superior Liquidity is driven by an expected cash accrual of more than Rs 4,000 crore annually over the medium term, leading to further accretion to cash surplus and current investments, which stood in excess of Rs 12,488 crore as on Dec 31, 2024. The company has remained net debt-free, and this is likely to continue in the absence of any major debt-funded expansion plans over the medium term. Cash accrual will more than sufficiently cover incremental working capital requirements and small-ticket acquisitions |
Outlook: Stable LTIM will maintain its healthy business risk profile over the medium term, supported by steady revenue growth, sound operating efficiency, and the strength of the L&T brand. |
Rating Sensitivity Factors Downward factors:
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About the Company Headquartered in Mumbai, LTIM was incorporated in December 1996. The company is a subsidiary of L&T and provides IT services such as application, development, maintenance, enterprise solutions, infrastructure management, testing, analytics, artificial intelligence and cognitive and other services. LTIM has offshore delivery centres in Mumbai, Pune, Bengaluru, and Chennai; global development centres in the US, Canada, Europe, South Africa, the Middle East, and Singapore; as well as various sales offices.
On a consolidated basis, operating income was Rs 28,236 crore in the first nine months ended December 31, 2024 (Rs 26,624 crore in the corresponding period previous fiscal), with net profit of Rs 3,473 crore (Rs 3,483 crore).
Key ESG highlights: The environment, social, and governance (ESG) profile of LTIM supports its already strong credit risk profile.
The IT sector has a low impact on the environment because of the inherent nature of digital services, core operations as well as products. The sector has a social impact because of its large workforce. LTIM has focused on mitigating its environmental and social impact.
There is growing importance of ESG among investors and lenders. The commitment of LTIM to ESG principles will play a key role in enhancing stakeholder confidence, given its high share of market borrowings in overall debt and access to both domestic and foreign capital markets. |
Key Financial Indicators
Consolidated; Crisil Ratings adjusted numbers |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
&Partially fungible with fund-based facility (Overdraft/Packing credit) to the extent of INR 70 Crore |
Annexure - List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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%This is a Short-term – Fundbased – Intraday – overdraft facility
Criteria Details
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