New Delhi, Jan 18 (IANS): IT stock LTIMindtree plunged more than 10 per cent in trade on Thursday due to disappointing Q3 results.

The stock is trading at Rs 5,604, down 10.7 per cent on BSE.

Motilal Oswal Financial Services said in a report disappointing 3Q, weak near-term outlook a drag on FY25 growth. Longer margin recovery cycle leaves little room for upside, it added.

LTIM reported weak revenue growth of 0.7 per cent QoQ/3.1 per cent YoY CC in 3QFY24 vs. our estimate of 1.2 per cent QoQ CC, despite having a meaningful pass-through component in the Manufacturing vertical. The growth was affected by higher-than-expected furloughs and a continued slowdown in discretionary spending. However, deal wins were strong at USD1.5b (up 15 per cent QoQ/20 per cent YoY) and management commentary on the deal pipeline was robust. The management has indicated that 4Q growth will mirror 3Q due to persistent pressure on clients’ spending, the report said.

The 3Q performance was affected by higher furlough than anticipated. The demand environment is further intensifying due to challenging macros. The challenging macro environment is making clients cautious, slowing decision making and delaying deal-closure activities. Additionally, discretionary spending has ramped down across its client base and will take time to recover. Hence, the company expects the growth recovery to happen gradually in 4Q.

However, the management has indicated that it has a good pipeline of deals and the majority of them are cost-optimization and efficiency-related deals, which usually take more time to achieve full potential, unlike transformation deals.

The margin was affected by higher furloughs (200bp impact) and seasonal passthrough revenue, which was offset by 80bp SG&A absorption and another 60bp through operating efficiency, the report said.

(Sanjeev Sharma can be reached at Sanjeev.s@ians.in)