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ltimindtree real estate consolidation plan: LTIMindtree at work on real estate consolidation plan: MD Debashis Chatterjee

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LTIMindtree Ltd., the company formed by the merger of mid-tier tech firms Larsen & Toubro Infotech and Mindtree Technologies last year, is working on a real-estate consolidation plan.

Its managing director, Debashis Chatterjee, told ET that real estate rationalisation will drive up to 200 bps margin growth over four-five years.

While the leadership of the Mumbai-based technology services and consulting firm works on real estate consolidation to reduce overlaps and duplication, it is also exploring ways to expand its delivery centre footprint.

Chatterjee said that while merger synergies have kicked in to a large extent, the real estate alignment is in process and will be realised over the long term.

“We expect 200 basis points (margin efficiency from rationalisation) over a period of four to five years,” Chatterjee said, adding that in some cases, duplicate facilities in expensive locations, like London, will be consolidated as the lease runs out.

LTIMindtree was the biggest merger in the Indian IT sector after the $2.7 billion Satyam- Tech Mahindra merger in 2013. With a market cap of Rs 136,656 crore, LTIMindtree is the fifth largest IT company in India by market capitalisation, putting it ahead of Tech Mahindra. The latter is, however, the fifth largest IT major by revenue.

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LTIMindtree’s revenue for the full year stood at Rs 33,183 crore, trailing behind Tech Mahindra, which reported a revenue of Rs 53,290 crore.COO Nachiket Deshpande said the company has up to seven real estate projects planned for India that will be launched over the next two quarters, in addition to global facilities to be added to the footprint.

“When we merged, we were short of 30,000 seats as we added capacity during the pandemic,” said Deshpande. “The places where we have two sales offices, for example, you don’t need that. But the delivery centre footprint still has a long way to catch up with our headcount.”

In the fourth quarter ended March 31, LTIMindtree’s employee costs were up nearly 30% year-on-year to 5,580.7 crore, while other expenses had increased by 19% to Rs 836.4 crore. The jump was attributed mainly to merger-related costs.

In the fourth quarter of FY23, LTIMindtree’s net profit grew by 0.5% year-on-year, missing analysts’ estimates mainly due to higher employee costs and other expenses. The merged entity had started operating in December 2022.

Chatterjee said the company wants to continue focussing on its growth trajectory and will only sacrifice margins in pockets if it has to make substantial investments for capacity building.

BFSI impact

In the fourth quarter, LTIMindtree had reported a hiring freeze across certain banking clients, which is expected to continue into Q1 of FY24, along with a strong focus on cost takeout initiatives. LTIMindtree’s BFSI (banking, financial services and insurance) business, which accounts for 38% of its revenue, grew 20% over the year in Q4.

“(Banking) clients all over the world are a bit hesitant about committing large spending. So, there is slowdown and decision making. But we think that that situation will start to ease out towards, you know, the second half of the calendar year,” said Sudhir Chaturvedi, president, LTIMindtree.

He said the company sees new opportunities in this area across risk compliance and governance. LTIMindtree also sees a demand from banking clients and other sectors for solutions using generative AI and large language models, said Chaturvedi.

He added that particularly for efficiency-based marketing use cases, the company is implementing ChatGPT-like solutions through its generative AI studio. “Marketing use cases tend to be very generic. Using generative AI it can be customised to a great extent within a much shorter time period,” said Chaturvedi.

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