Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
L&T Technology Services Ltd (NSE: LTTS) Q3 2026 Earnings Call dated Jan. 15, 2026
Corporate Participants:
Sandesh Naik — Head of Investor Relations
Amit Chadha — CEO & Managing Director
Rajeev Gupta — Chief Financial Officer
Analysts:
Ravi Menon — Analyst
Vibhor Singhal — Analyst
Nitin Padmanabhan — Analyst
Sudhir Guntapalli — Analyst
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q3FY26 conference call of L&T Technology Services Ltd. As a reminder, all participant lines will be in the listen only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing STAR and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandesh Naik, head of Investor Relations.
Thank you. And over to you, Mr. Naik.
Sandesh Naik — Head of Investor Relations
Thank you, Darwin. Good evening. Wishing you and your family a Happy New Year. I am Sandesh and welcome you all to the earnings call of L and T Technology services for the third quarter of FY26. Our financial results, investor release and press release have been filed on the stock exchanges and are also available on our website, www.ltts.com. I hope you’ve had a chance to go through them. This call is for 60 minutes. We will try to wrap up the management remarks in 20 minutes and then open up for Q and A.
The audio recording of this call will be available on our website about an hour after the call ends. With that, let me introduce you to the leadership team present on this call. We have with us Amit Chadha, CEO and MD Alin Saxena, Executive Director and President and Rajiv Gupta, cfo. We will begin with Amit providing an overview of the company performance and outlook followed by Rajiv who will walk you through the financial performance. I now invite Amit for his opening remarks.
Amit Chadha — CEO & Managing Director
Perfect. I hope I’m clear.
Ravi Menon — Analyst
So you are clear. Yes.
Amit Chadha — CEO & Managing Director
Excellent. Perfect. Thank you so much. And thank you Sandesh. Wishing everybody on this call a very, very happy and prosperous New Year, a very Happ happy Sankranti and a happy Lodi. That said, in Q3, we’ve had multiple conversations with clients including hosting our fourth advisory council in MIT Media Labs in Boston. Based on our interaction, we believe CY26 holds promise as macro situation improves and demand, particularly in new age technology areas continues to strengthen. This is also reflected in our large deal pipeline and closures in preparation of our Lakshya five year strategy starting FY27, we have used the past quarter to reevaluate market trends.
Consult with clients on their spending priorities and potential high growth profit pools. Based on these insights, we are taking decisive actions for delivering full stack engineering intelligence. EI Solutions Trying to become the first company worldwide in EIS Solutions. Reassess our regional focus and offerings which are not in line with our five year Lakshya roadmap in Q3. We have therefore deliberately improved our quality of revenue in line with this strategy. Therefore this and other factors are reflected in 120bps improvement quarter on quarter with Q3 EBIT margins at 14.6.
Rajiv will share more details in his commentary. Now let me provide the key highlights in our Q3 performance revenue of $326 million grew 4.6% annually while we degrew 3.2% sequentially as we rebalanced our portfolio towards futuristic technologies to serve our customers and tap into market potential. Sustainability continued its double digit year on year growth momentum while mobility showed early signs of improvement despite a seasonably weak and slow quarter. Our large deal wins came in at a healthy TCV of USD $180 million in the quarter.
It is a fifth straight quarter where we have maintained this TCV trajectory. Now let me provide our segmental performance and outlook. Mobility despite being a furlough quarter, Mobility showed modest uptick. 50% of our large deal wins in Q3 were in the Mobility segment. Our aero and rail subsegment has shown growth sequentially while trucks and off highway was slightly subdued. The auto sub segment turned the corner and is seeing positive traction. We were a large multimillion dollar engagement from a global luxury OEM covering infotainment system engineering across multiple product domains, assessment and assurance of telematic modules.
We signed a multi year agreement focused on engineering the next generation of AI powered, premium, connected and intelligent marine experience. We are accelerating software defined vehicle offerings by incorporating advanced EI capabilities in the software lifecycle and product development. This is enhancing the overall product experience for end customers. In fact, happy to share that we’ve been rated in the top two in SDV in the last two weeks and we’ll share the report with you in a short while.
From JIO perspective, the US market is positioned for a recovery after several quarters of slowdown in spends with increased investments particularly in SDV technology. Europe’s focus is shifting towards low cost countries and strategic partnerships. Investments for new vehicle models are deferred while cost optimization remains a priority. We are well positioned to be the net beneficiary of these opportunities as demonstrated by the recent large deal win from the region. New model launches by OEMs in Japan indicate growth opportunities and we are seeing steady wins.
80% of the revenue in mobility is now predominantly from OEMs as compared to 20% from them a few years ago, ensuring greater stability in our client revenue mix. And if you remember this is one of the factors that we were a little worried about till now. The pipeline remains robust with multiple deal conversions happening in auto, tnoh, Aero and rail. In summary, the mobility segment is witnessing green shoots and we expect to see continued growth momentum in CY26 due to better ramp up on large deals.
Coming to Sustainability the sustainability segment grew 11.4% year on year and quarterly reflecting steady demand and execution strength in the deals we have won in the last few quarters. The industrial subsegment is benefiting from our EI solutions which combine digital automation AI powered platforms across PDLC offerings for our clients. The energy and automation and industrial machinery sectors continues to see good demand with a strong pipeline in asset management and large deals. Of the 100 million deal announced last quarter, we are steadily ramping up and going as per plan, leveraging our EI portfolio to support the client across new product development and platform automation.
In plant engineering, demand continues across ONG and CPG for CapEx projects and ongoing spends on digital and modernization of legacy plants. In India. We are also seeing demand from the chemical industry. We were chosen by an Australian enterprise to establish a high value engineering center focused on engineering and digital technologies in a multi year engagement. We further expanded our partnership with a leading global energy company to enhance information management and existing assets including document data management for its capital projects.
Leveraging AI NLP solutions re industrialization in the US and pharma companies setting up plants domestically will create significant opportunity for sustainability segment. We expect growth momentum in the sustainability segment to continue across industrial plant due to ramp up in large deals and a strong pipeline. Moving on to Tech the AI investments that we have made have been validated by recent client spending and we are doubling down on our focus on AI EI solutions that will help us scale.
As I mentioned earlier, we have recalibrated our business in the segment to ensure that we put our attention to future technologies that will offer higher profitable growth. The media tech subsegment is rapidly evolving with strong focus on design led offerings resulting in execution of more high end and high margin work for our clients. We have seen steady growth in our semiconductor accounts and have also entered into a multi year engagement with a leading global SEMCON platform provider to consolidate advanced lab support operations.
Deals that we had won in previous quarters. In the telecom subsegment have been steadily ramping up in the MedTech subsegment. We are seeing healthy demand across all geographies. LTTS secured a new multi year deal with a leading medical device manufacturer to deliver comprehensive product development engineering services in the cardiopulmonary segment. We expect MedTech to grow in CY26 leveraging AI EI solutions across Digital Manufacturing, Sustenance Engineering and Quora. The software and platform subsegment which includes IntelliSwift has provided us a platform to leverage our Engineering Intelligence framework for data driven intelligence and automation and data science and data engineering.
IntelliSwift is a plan to delivering as envisaged. We have received a large impediment from a hyperscaler and expect that to start ramping up Q1 onwards in SWC we have been working on FusionWorld AI solution, an AI based compute vision operating platform for smart spaces which is seeing traction amongst customers internationally. We recently deployed the solution for a smart campus project in India and are also making bids in exciting areas including data center programs across North America. Finally, let me share a few updates on our technology and innovation charter.
Our suite of AI offerings are evolving with the launch of new agentic AI platforms as we pivot from AI artificial Intelligence to delivering full stack engineering Intelligence or EI solutions for our clients product and manufacturing life cycles. We have filed 229 patents in AI and GENAI alone while our overall patent count is 1655. This quarter we have moved AI from pilots to production grade deployments across engineering, manufacturing, mobility and medtech. With AI now embedded across pdlc, sdlc, embedded systems, ITOT and manufacturing workflows for our clients.
We are doing multiple programs leveraging Nvidia Omniverse platform to develop and accelerate AI powered solutions focused on digital twins, medical technology and industrial digitization. We have built AgentIQ IQ, a scalable enterprise ready platform enabling rapid creation, orchestration, deployment, monitoring and governance of AI agents across engineering life cycle positioning LMTs beyond point AI solutions into platform LED value creation. 30% of our workforce is already trained in AI with plans to reach near universal AI literacy within the next three quarters.
Ensuring delivery capability and capacity keeps pace with client demand. Overall, the macro environment has started looking positive with revival and deal related conversations across all segments. As we pivot to a full stack engineering intelligence provider, we see more headroom for proactive deal structuring opportunities. This will give us the ability to offer an integrated suite of AI LED solutions to our customers in areas like digital manufacturing, software, product engineering, engineering analytics and new product development.
Talking about Outlook, Let me reiterate our emphasis on shareholder value creation. As I mentioned earlier, we have made a conscious decision during the quarter on discontinuing select regional and technology offerings. This is evident in our Results reflected in a 120bps Q on Q improvement with Q3EBIT margins at 14.6. With these developments in mind we are guiding for mid single overall growth in FY26. Meanwhile our focus business areas will see a double digit growth in the same period. I thank you for your continued guidance and support.
I would now hand over the call to Rajiv for further updates. Thank you.
Rajeev Gupta — Chief Financial Officer
Thank you Amit. Wishing you and your families a very happy New Year. I will start with the key highlights for quarter three FY26. Our sustained focus on building strong pipeline and going deeper to scale strategy has helped in large deal wins resulting in an average TCV of $200 million for five consecutive quarters. Sustainability Our highest margin segment grew both in revenue and margins while mobility saw slight growth in a seasonally weak quarter. Q3 FY26 saw a boost of 200bps in gross margin on sequential basis largely due to improved quality of revenue and operational efficiencies, discontinuation of strategic support provided in the past few quarters and rupee depreciation during the quarter.
With that moving to quarter three FY26. Financials starting with the P L, our revenue for the quarter came in at 2,924 crores, a growth of 10.2% year on year down 1.9% on sequential basis. EBIT margins for the quarter came to 14.6%, an improvement of 120bps over the previous quarter. Other income was 18.4 crores, sequentially lower due to USD appreciation compared to INR and asset transfers pertaining to closure of client projects. Effective tax rate for quarter three came in at 26% showing an improvement from previous quarters by 50 basis points.
We expect ETR to be in the range of 26.5 to 27% for the year, showing an improvement relative to previous year. Net income for the quarter came in at 329.1 crores at 11.3% of revenue. I would like to also highlight the impact of new wage code. The impact of new labor codes is treated as one time exceptional item amounting to 35.4 crores net of tax at 26.5 crores. Over the past few years we’ve been consciously working towards improving the basic salary component in line with new wage core resulting in relatively lower liability.
Talking about the balance sheet, let me highlight key line items. The combined DSO came in at 112 days compared to 114 days in Q2. This is within the target range of 110 to 115 days and expect to improve further, the bill DSO also improved to 91 days as compared to 94 days in quarter two. Our free cash flows improved further over the quarter to R470 crores due to consistent collection efforts leading to year to date. Free cash flows at 886 crores which is a healthy free cash flow ratio of 91% over net income.
Cash and investments stood at 3160 crores at the end of quarter three versus 2,883 crores at the end of quarter two. With respect to revenue metrics in dollar terms we reported revenue of $326.3 million as compared to 337.1 million in quarter two. A growth of 4.6% on YY basis while a decline of 3.2% on sequential basis. The decline in Q3 revenues on account of being selective on revenue portfolio of offerings and regions in line with our upcoming five year strategy plan talking about segments mobility, Segment margins for quarter three came in at 14.8% flat compared to previous quarter and this is despite furloughs.
Mobility revenues will show growth in coming quarters with environment now showing improvement in automotive sector along with sustained growth in Aero and rail subsegments. This will lead to improvement in overall mobility margins from here on. Sustainability segment further improved in margins to come in at 28.8% higher by 70 basis points on sequential basis. The ramp up of deal wins in previous quarters have led to improvement in quality of revenue and also margins and this will continue to aid revenue growth and margins as we go into FY27 tech segment margins for the quarter came in at 10.6% and improvement of 160 basis points over previous quarter.
This is due to improvement in Intellisys margins, discontinuation of strategic support to customers in the last few quarters and the action taken on recalibration of portfolios and geographies to improve quality of revenue. In line with our upcoming five year strategy plan on operational metrics, the onside and offshore mix has slightly moved towards onshore as compared to Q2. Offshore percentage now stands at 54.6%. We continue to work to improve this in the coming quarters. The TNM revenue mix was at 61.4% in Q3 similar range as compared to Q2.
Our client profile has seen an increase in the number of clients in 20 million plus category and our deep relationship with clients and new age offerings will help improve this profile. From here on client contribution to revenue similar range compared to Q2 across categories headcount remained flat at 23,639 in Q3 compared to 23,678 in Q2. Attrition came in at 14.6, slightly better compared to Q2. Our realized rupee in the quarter came in at 89.58 to the dollar a depreciation of 1.4% versus Q2 as I conclude.
Let me provide visibility on margin trajectory going forward. We did refer to in our Q2 commentary that H2 margins will be better than H1 and are already seeing Q3 margins improve by 120 basis points. We expect margins to continue to improve from year on based on capital allocation towards high margin segments of sustainability and mobility, selective choice of portfolio and geography which will result in improvement in quality of revenue and thus improvement in margin and operational efficiencies including AI net delivery.
With that we maintain our aspiration for mid 16% EBIT margins between quarter 4 FY27 quarter 1 FY28 thank you and now I hand it over to the moderator for questions.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Vibor Singhal from Nuvama Equities. Please go ahead.
Rajeev Gupta
Yeah hi, thanks for taking my question and wish you, the Visualizing team, a very happy New Year. Amit and Rajiv, I have a few questions with a few more sub questions so I’ll try to squeeze in as many as I can. So this one just wanted to understand the nature of this researching exercise that we have taken. Is it like there are some of the clients for which we have stopped doing the projects? Is it some of the divisions that we have basically kind of shut down and we will not be taking any more projects in that domain.
And also if I look at the basically breakup of this, I think it appears to be that the major restructuring has happened in the tech segment and in the India business. So would it be fair to say that the large part of it would predominantly this is the SWC business that we had acquired that we are kind of closing down because that is also leading to an improvement in margins.
Amit Chadha
Sure. So first of all thank you so much and wish you a happy New Year as well. So let me step back and talk a little about what’s happening. See we agree what’s happening is there are huge spends, capex spends that are happening in the data center buildup and the energy buildup area in the US and that is creating follow up opportunities in the hyperscaler. That is creating opportunity in the tech infra business, in our area, in the Semcon area as well as in IP because there’s you know, for data center build out you need all those things.
And then finally our chain plant, so it’s a cross vertical tailwind if I may. Second, we are seeing re industrialization of the U.S. Third, people are moving from AI from enterprise to actually physical digital plus industrial which we are calling engineering intelligence. Right. So when we looked at all that and we looked at our bets, we said that we need to narrow our focus into specific areas that will give us extraordinary growth and leap forward as opposed to areas that may be lukewarm in growth and lower in margins.
We balance all of that and we said we don’t want to play in a commoditized business tomorrow where you can do copy paste and cut paste. We want to be people that are known for technology and we want to look ahead so we don’t get into a problem. So in the future. So with all. And then we knew that with our business that we were at, we were comfortable with the double digit guidance that we had given you and we were at that trajectory. So we spoke to our board as well and the guidance was that you know, there is stuff that doesn’t make sense and is getting commoditized.
Start looking at, seeing if you want to rationalize it. So with that said, what we have done is there is parts in our business that we were doing in the tech segment in Israel that we have taken and we have now closed that down. There was business in parts of Europe in very small area of mobility, a little bit in tech again which was old technology and we knew that the next step would be deep discounts, etc. So we shut that down as well. And third, then we looked at our us the couple of us clients that were operating at projects that were operating on older technology where we were counting the revenue actually from India because the PO was from India.
So we took that also and we have taken that out as well, including shutting down the lab, providing the equipment back to the customer. And then there was a little bit of revenue that was coming from Indian customers that was not adding value. So we did not accept new orders in that area. So all put all that Together is what we have done before as we stand today now. Yeah, so that was the question, right? Yeah,
Rajeev Gupta
Yeah. So I mean, is it fair to say, given that we have seen a very sharp decline in the India business and in the tech vertical, that major part of this researching size would be in the SWP business?
Amit Chadha
No, before I would not land that case, I would say it is. It. Is a lot of, in fact a lot of it is POS that were being routed to India on tech labs etc that we have taken out. And you know, look at the other part that I talked about Middle East, Europe and there is these orders that we, that we would have otherwise taken. But we said, you know, there’s no point taking in empty calories, I’d rather take something that is value add for the company. And that is why we decided to let it go. So it’s a mixed portfolio, if I may.
In fact, if you remember we had purchased swc, there was this telco infra part, cyber part. So I am happy to share the cyber part. We’ve actually won three new contracts, less than $10 million. But cyber contracts in the US in fact we were hoping to sign a bigger deal and announce it to you guys but Christmas came and you know, everybody went merry. So we’ll do it in this quarter. But so cyber is growing there and TechInPra as well. In the US there are newer areas coming up on connectivity which we are actively engaged in and growing.
In fact that one operator that we signed has been signed because of the tech business domain experience that we got from swc. So those continue to be the bright spot. In fact Middle east also we are there. In fact I was there in Middle east for three days and again going back in Feb appears to be a promising area for us. I would not come to that conclusion just yet. But this is in play. We expect to finish all of this by March. See on grounds of prudence because we could have actually kept quiet and said we’ll tell you in March and all that.
Right. We decided we are and we are a very clear on its transparent management team. So we wanted to in prudence tell you that by the time you end quarter four March end the floor is you will end up somewhere in the middle digits. And if you are able to win some of this and grow, maybe it will be a little bigger than that. But this is the right time. We thought consciously to make this pivot on margins, get it to that, like Rajiv said, get to the 16.5% EBIT range where we Also are comfortable and you are also comfortable.
Rajeev Gupta
I really appreciate that and I think we’ve discussed it many times. It’s good to take a decision which are in the benefit of the long term of the company rather than focusing on the short term goals. So congrats to the entire team for taking this step. Just last couple of questions. So is the researching exercise done or we could see some more steps being taken and some more accounts being closed in Q4 or in the coming quarters.
Amit Chadha
See before like I’m saying. So if I see if I would have only assumed Q3 I would have maybe given higher single or whatever. I’m taking everything into account and telling you the floor is mid single and you will be done. So maybe you know a little bit here there will be in play. So
Rajeev Gupta
Got it, got it. And just one last question for Rajiv and I’ll leave the floor from the other participant as well. I know this business definitely boost the margins also. So going forward do you expect more margin expansion vis a vis because of this research exercise that continues to go or do you think we’ve kind of plucked most of the fruits of this research exercise? And secondly,
Sandesh Naik
Does this also benefit our DSO days in coming future and will it also help getting them down as well?
Rajeev Gupta
Let me respond to both of your questions. Of course we’ve been taking guidance from many of you, so appreciate that part. The margin improvement will continue, right? And that’s the reason I provided a guidance of mid 16% levels between a range of quarter four FY27 and quarter one FY28. And there were three factors of course. One was because of the intellisive acquisition, the integration plan would continue to show margin improvement sequentially as we move forward. That was one. Second was of course this recalibration exercise that Amit largely explained I think lands in Q3.
He’s given a view for FY26 but that largely solidifies our ability to grow in portfolios that we think are more futuristic and are profit pools. So that will also contribute third if you really see and that’s what we talked about earlier, our sustainability segment and all the large deal wins continue to translate. So you see growth double digit year on year. You also see improvement in profitability. Of course that part will continue. But alongside we are now seeing green shoots in mobility. So mobility if you look at year on year margins, it’s come down ebitda of about 19 to 20% is down to about 15%.
We also believe that mobility will continue to turn around from quarter four onwards. Work to be done. But you will see over the course of next four quarters that the profitability will move and we aspire for that mid 16% range. Second on the DSO. Yes, we will continue to improve DSO. Our aspiration is much like on our free cash flow. And I remember some of you posing that question that we will be delivering 90% plus of free cash flows in the year. Indeed, we are delivering in the first nine months.
Much like that, we will continue to improve dso. At the moment I have given a range of between 110 to 115 days. Our aspiration is to improve beyond that. But at least I have given a view for the year.
Vibhor Singhal
Got it, got it, got it. Great. Raji, thanks you. Thank you so much for taking my questions.
Rajeev Gupta
And
Vibhor Singhal
Congrats again to the management team
Rajeev Gupta
For the Gold State. Wish you all the best.
Amit Chadha
Thank you.
Operator
Thank you. Our next question comes from the line of Sandeep Shah from Equis Securities. Please go ahead.
Vibhor Singhal
Yeah, thanks. Thanks for the opportunity and Happy New Year to all the management team. Sir, the first question is Project Lakshya was in place for more than 2, 3 years at a group level. So why suddenly this exercise versus last three months before we were not thinking about the same. I do agree this will create a value added portfolio with a higher margin. But what has led to this? Why I’m asking is there has been more than two or three restructuring exercises which we have carried out in terms of growth strategy in the last three, four years.
But somehow organic growth is not picking up. So now with a new restructuring exercise, what will change in terms of changing that organic growth part?
Amit Chadha
Sure. So thank you so much. So if I may provide a little bit color. So Lakshya is not a two, three year program. It’s a five year program. It happens every five years. We are in fact our first Lakshya was 2010, 11, right up to 1516, then it was there to 21 and then 21 to 26 and now we’ll do 26 to 31. So it’s a five year program. These are not two three year programs. So that is point number one. Point number two is that we did mention and I think we had talked about it during our investor call or we had talked about it in one of those process that we do five year program.
So the new five year next five years program will start on April 1, 2026 and go on till March 31, 2031. Right. So this is part of the process that we follow. Point number two is that we are if I look at it, we’ve restructured or simplified our organization in segments and we today have six sales teams in North America, we’ve got four regional teams outside of North America, total 10 teams. That allows us the ability to continue to look at deals globally rather than in specific areas. This has actually given us the ability to sign about 200 million, around $200 million of TCV for five straight quarters.
And the wins that we have had in sustainability, you can see that playing out, you can see mobility turning around. And in tech, if I was to include the stuff that we dropped, we’ve actually grown double digit. So we do have organic growth coming along. Now if we are a tech company, we have two choices. I could go back and stay in a business that tomorrow will become dilutive, continue to be dilutive in margins, continue to drain away some of the good stuff that is happening in other areas, or the choice is that before I get commoditized I turn around and I turn around and then do it in advance.
Lastly, and we had talked to you in advance and you notice that in our calls we give you some forward views. We normally have views that are between nine to 12 months ahead of the market. So we do believe that the market is pivoting on ei. They are pivoting to physical, digital, industrial, combined AI. And that’s why we don’t pivot now. We will be in a problem in 9 months time or 12 months time. So this is our first restructuring exercise in this space in this area. And I would like to acknowledge actually that our teams have done very well in terms of being able to identify in the last quarter itself, take action and decisive action which has helped us improve the margins within the quarter.
I would have rather done that than come back, lower the revenue, not improve the margins and done it two quarters down. We have been able to provide decisive action in the same quarter and from here on you will continue to see margin improvement as you are seeing and like I said, we will shut everything off. Whatever we have to do should happen hopefully by, or will happen by March 31st per our current plan and your company, therefore, April 1st onwards continues to focus on EI. Look, our ambition is to become the world’s first and biggest EI company in services and solutions and we will continue to march towards that.
Vibhor Singhal
Yeah, just a follow up in this rationalization exercise. Once it’s over, one can assume SWC seasonality which leads to volatile growth will now no longer be valid starting next year. And question to CFO sir, just we are cutting down on a low profit portfolios. But our margin milestone has not been changed. It should have changed. Right with the restructuring exercise it could have been better than 16 and a half. So any reason for the same.
Amit Chadha
So can you repeat your first question?
Vibhor Singhal
Yeah, just restructuring exercise, SWC seasonality will now won’t be there starting next year.
Amit Chadha
I heard you. So we seem to be in love with mobility on some calls and we seem to be loving SWC on some calls. We just don’t like sustainability which is the highest profit margin in the company. Is it okay, so now. Right, so let’s go to this. So. So all I can say at this stage is that we are looking at our portfolio very seriously. There are actions that we have taken. There are actions that we are taking. So please allow us till April when we come back when we provide you that kind of clarity at this stage.
Please give us some more time in play right now. And on margins I think Rajiv, you. Can please answer
Rajeev Gupta
Sandeep Rajiv here. I think on the second question that you have that we should have seen probably an acceleration in terms of EBIT improvement. Rightly acknowledge at this point there is a little bit of prudence that is baked in. I probably will come back in quarter four to clarify. Our intent is definitely to deliver earlier than what I am guiding for. But at this point it is more prudence that I have maintained that time period.
Vibhor Singhal
Okay, fair enough. Thank you. All the best.
Operator
Thank you. Our next question is from the line of Nitin Padmanabhan from Investec. Please go ahead.
Nitin Padmanabhan
Yeah, hi, good evening. Wishing you a very happy new year. Just wanted some context around the margins. So one, obviously the support that we were giving for the customer has come off and we have also had some currency benefit as well and looks like well, we have cut down these businesses. The headcount is still pretty flattish. So just wanted some context around. How should we understand this is the margin benefit from the cut down of businesses likely to accrue more in the next quarter and beyond or that is largely already factored in in the current quarter.
So yeah, that was the first question. The second one was around when are we expecting to sort of give out salary increases? And finally, well, our deal wins have been consistently strong I think for the past couple of quarters and I think if you look at it year on year, it’s a very strong growth. When should we start expect that to really start showing up from an overall portfolio perspective in terms of higher growth.
Rajeev Gupta
So Nitin, let me take the first couple of questions and I will have Amit to respond to the deal wins part. So first one on the margin trajectory. I think what you need to understand is that in the quarter we’ve seen the margin improvement come through from three areas. I called out during my commentary. It has indeed been on the improved quality of revenue and operational efficiencies. Of course sustainability has grown. We’ve also talked about some of the selective choice of portfolio of revenues and geographies.
That’s one. The second is on discontinuation of the strategic support that we provided in the past few quarters and rupee depreciation. So it’s a mix across. But what I’d like to leave you with is that look, going forward the margin improvement will come from three to four areas. One is that we want to become more, I would say sharper in terms of capital allocation towards higher margin segments and technologies. Amit talked about ei, which is really the engineered intelligence and you will see margins improving across mobility, sustainability and tech.
Right. So it’s going to be a combination. I already talked about selective choice of portfolio and geography. Last but not the least is the operational efficiency. We recently had Munje who has joined us as a Chief Operating officer. He is championing the AI cost for the company and there is a lot of work at this point in time going around AI LED delivery. And we will call out more specifics as we come into quarter four, but these are the areas that likely will continue to improve. And last is around the IntelliSift acquisition.
Like I said earlier, we’ve got about six to eight quarters of integration plan and that business has continued to grow and improve in profitability. So those are the three, four areas that I’ll clarify in terms of the margin trajectory going forward.
Amit Chadha
Second question was on wages.
Rajeev Gupta
On the wages. Let me respond.
Amit Chadha
Yeah, wages. We will provide wage hikes to all our employees worldwide in quarter four and we have baked that in into our estimates as we have provided you our margin trajectory. Right, so that is your second question. Third was on deal wins. So Nitin, we’ve had deal wins in sustainability look, so I was very honest and open in sharing what did not ramp up. So the mobility win that we had in quarter four has not ramped up for us. Right. And still going small as opposed to what we were expecting.
The other wins that we have had in sustainability and plant subsegment as well as in industrial products have ramped up and therefore you can see that growth, mobility. There were some smaller wins, sub 10 million wins that have helped us in Terms of the biggest hit we take on the furlough quarter, which is October, November, December is in mobility and largely mobility, US and Europe, where we take them, mobility where we take the hit. So in spite of that, mobility sequentially grew for us and we believe mobility has bottomed out.
You will see growth from here and a little bit of ramp up. Whatever we have won in quarter three, that entire ramp up of that I’m confirming to you has already taken place in tech. The deals that we had won, they did, like I mentioned to one of the earlier colleagues on the call, that when you look at tech, if I keep the business that I walked away from, I would have actually shown you double digit growth as well as sequential growth in tech as well. So the deals are ramping up. Other than that one deal that I called out, the others have ramped up as we speak.
Nitin Padmanabhan
Perfect, that’s helpful. Just one clarification. So as we get into the next quarter with the wage increases in place, are there any, could you give us some sense in terms of puts and takes on how to think about margins there or should we expect margins to be lower? We will not be able to offset the wage increase at Brazil.
Rajeev Gupta
So Nitin, let me take this question. So you should see the wage increases in quarter four that Amit talked about could likely have an impact of about a percent. But we will continue to see improvement in margin because we factored this wage increase like you saw in quarter three, we saw an improvement of 200 basis points in gross margins and that also will somewhat pan out, not to that extent, but will pan out in quarter four between both gross margin or sga. So about a percent of increment impact will get absorbed on account of all the aspects that I talked about on margin improvement.
Nitin Padmanabhan
Perfect, that’s very helpful. Thank you so much and all the very best.
Operator
Thank you. Our next question is from the line of Ravi Menon from Macquarie. Please go ahead.
Ravi Menon
Thank you. And congrats on the margin improvement. Just some clarity on the tech vertical margins. So last year Q3, I know that’s prior to the acquisition, but still that’s on an EBITDA basis, we are still a bit below that. So what to understand is that with the restructuring, what would be a sort of sustainable EBITDA in tech that we could see a year or so down the line?
Rajeev Gupta
Ravi, I’ll take that question. This is Rajiv here. So a sustainable EBITDA in the tech portfolio. And you rightly said, right. If you look at year on year, quarter three, we had EBITDA of 11.5% we’ve come in at 10.6% in quarter three, FY26 what I will say that look we would aspire for between 12 to 13% EBITDA range in Texas sector work left and I think we’ll continue to see this over a period. So that’s what you should factor in.
Ravi Menon
Thanks so much. And this deal that you have won with this luxury OEM covering infotainment systems, does that start purely I can say project oriented work or is there a bit of IP also bundled as part of that?
Amit Chadha
There’s a little bit of IP bundled in that Ravi, and part of a little bit of that is renewal being completely transparent and there is a part of it that is new. So we have won all that. In fact I want to share that. The IP that we have created, we have bundled that in including our AI solution for improving productivity etc for the client. That’s how we won this.
Ravi Menon
Thanks so much. And another clarification on this team, this Austin Enterprise, which segment would that fall under? The high value Engineering center that you’re setting up? Australia. Yeah.
Amit Chadha
LNGs will come in plant engineering. Most of the work will be offshore.
Ravi Menon
Thanks so much. And one last question on this on site shift. I missed that part of the comment I think. When do you expect this to move offshore or this is strictly temporary?
Rajeev Gupta
Ravi, I’ll take this one. Rajiv here. I would say that this is more of enough. I think it kind of come back. See we’ve hovered around offshore ratio between say 56 to 58% hence I would not at this stage guide for where it’s stands to be in quarter three. You will see a few quarters and this will come back to that range.
Ravi Menon
All right, thanks so much Prasma.
Operator
Thank you. Our next question is from the line of Sudhir Guntapalli from Kotak Mahindra Asset Management. Please go ahead.
Sudhir Guntapalli
Hi Amit, thanks for the opportunity and appreciate the color you have shared on restructuring of lower margin business and agree with you on all the logic that you spoke about. But my question is when the SWC acquisition was announced roughly three years back, most of the analysts and investors have expressed the same concern at that point in time. So three years out, what has changed for us to sort of claim that it’s a great strategic fit to going to the level of saying that a lot of these businesses may become obsolete and that’s why we are now restructuring it.
Amit Chadha
So Sudhir, if I may help you here, the business that we have right now, look at that is not strategic for us for the future. So if I step back, right and I talk about, I talk about the whole portfolio. Sudhir, if I look at, so if I go back 15 years we used to work on mechanical engineering and auto with tier ones, right? If I Look at last five years, five years ago we decided that we don’t get into OEMs, we’ll be dead and we don’t move to EV and software, we’ll be gone. Today if I look at our mobility portfolio, you got 80% coming from OEMs and most of it in the non mechanical area.
So things change, times change. 15 years ago Mechanical was core for the company. They would give out embedded software is car companies today, they don’t care about mechanical. They are concerned about embedded in software. But that is a differentiation. So there is a part and relevance that core becomes contextual, contextual becomes core. This is reality in the business, right? That’s number one. Now let me take the pointed question on swc. I’m again saying the part that we have rationalized so, so they would.
The part that we have rationalized and we’ve taken out is stuff that’s in Middle East Europe part in tech. There is a portion of US tech which is old technology that we were supporting and testing that we realized will actually become completely commoditized in the next 18 months. So we actually shut that down and respectfully return the equipment to the customer. And that was All India billing that was happening. And third is there are parts of Indian customers where we did not accept new business that we could have otherwise accepted.
So Those are the three elements there. Now as far as SmartWorld specifically is concerned, there are parts of SmartWorld, like I said, Cyber security and Telco Infra that have found their foothold in US and Europe. There’s parts on data centers that have found their foothold in US and Middle East. But please give us some more time as we go through this process to come back to you as well. But we are fully aware of decisions made, decisions being made right now. And are we being strategic about it?
Sudhir Guntapalli
Sure sir, appreciate that context. So I agree with you that over. 10, 15 year time frame technology changes and a lot of things which were very relevant then might not be consequential anymore. But given that this is fairly recent, it’s a three year old acquisition and most of us have expressed this concern when you have actually refuted all these concerns and given a comfort that this is very strategic for you. So in that backdrop comes my question of what is the incremental discovery here that led to this rationalization, that is part number one and part number two, I am following up on this question because I think Sandeep asked the same question in a different form.
And from your response to them, I was not very clear whether this entire restructuring is happening entirely out of hwc or there are other parts to it also. So based on this two aspects, I. Am repeating this question. My apologies if there is a misunderstanding on my end.
Amit Chadha
So let me again try to explain the same thing I just said three times with no problems. So number one, there are parts of tech that we were servicing through Israel which we have shut down. Part two, there are parts of tech where we were supporting them from India getting the Indian orders on Indian INR billing which is what shows up as offshore for us in India revenue that we have shut down. There are parts, very small parts of old mobility stack work in Europe that we have shut down. And fourth, there are Indian clients that take some of our offerings where we could have accepted the order that lower margin that we did not accept.
We continue in my commentary I told you FusionWorld AI continues. There are parts of Smart World that we are working on in cybersecurity that continue overseas and the Smart World delivery is continuing to happen in India. So I don’t think the premise that, you know, the rationalization is all Smart World is correct. But like I told you, you had allow us some more time and we’ll come back by the, you know, within quarter four on what else steps will we make to take it forward? Look, our final business, the markets we operate are us, Europe, Japan, Middle east and parts of India that are profitable.
If there are business businesses in profit pools in India that are not profitable, I would not want to work on those businesses because that does not make sense for my investors.
Sudhir Guntapalli
Fair enough sir. Thank you.
Operator
Thank you. Our next question is from the line of Dipesh Mehta from MK Global. Please go ahead.
Rajeev Gupta
Thanks for the opportunity. A couple of questions. First about the 200 million deal intake which we referred for five quarter on average basis, whether it is sufficient for us to meet our aspirational organic growth. So that is question one. Considering all the rationalization, what we are currently carrying out and optimum mix or let’s say business mix change which we envisage over next couple of quarters. So that is question one. Second question is about SWC and related to restructuring. First is whether you can quantify impact of restructuring.
Whatever we have carried out this quarter, you valued 3, 4 element of restructuring. What would be the cumulative impact of that if you can quantify and last is about SW business. SWC business used to aware secular seasonality in quarter four. Partly you indicated it is not only swc, it is other part of business also where restructuring is carrying out kind of thing. So whether the usual seasonality, what we observe in the residual SWC which we continue to execute, whether we will see in quarter four.
Thank you.
Amit Chadha
Thank you. So number one, you know we aspire from this 200 million clips. We want to move to $300 million clip but I don’t know when because it’ll take a little time. Right. So you answer your first question. To accelerate growth we should move to from 200 to 300 million clip. Absolutely. And then 400 and then 500 from there. That’s broadly of course where we will look at as we move forward. Right. So that’s a B. Now again I’m. I mean I’m going to repeat myself here but smart world, the stuff that we let go or we are letting go will have an impact.
Had we not let it go. Let me answer it differently. Had we not let it go, you would have had double digit growth. Now because you let it go, you’re going to have mid single digits growth. You can do the calculation of what is the impact of, of that restructuring. Now I’ve taken that into account and given that to you as a floor. Assuming what we know in quarter four at this stage, if some new deals come in all of a sudden execution starts quarter four picture could change. So we will keep you updated as we move forward.
I assure you we will be as transparent as we can be with you. Whatever we know, you will know.
Rajeev Gupta
Let me ask it slightly differently. Considering whatever restructuring exercise we are considering to make organization future ready, do you think any impact on Those extents on FY27 growth trajectory or we will end this exercise by year end?
Amit Chadha
We should end the exercise. Our current plan is that the exercise will end by by March 31st and we will be able to go forward from there. That’s the current plan.
Rajeev Gupta
Maybe I’ll add to that Amit Tripesh just to clarify, right. See maybe Amit talked about it earlier. Large part of this restructuring exercise has already been done in Q3. The impact that flows into Q4 he’s talked about which is baked into the mid single digit growth. So I would not want you to think that there is more coming in Q4. Whatever is done in Q3 that’s already baked in the mid single digit growth. That’s one part. Second to your point on the $200 million deal wins in a quarter, does that suffice to tell you that’s not the only barometer for revenue growth?
We operate through our order book which gives us definite view in terms of revenue growth. Plus the large deal wins accelerates the revenue growth. So I would not want you to think about large deal wins as the only way for driving revenue growth. So those are the two points I’ll add to what Amit said.
Amit Chadha
I would like to confirm the pipeline that you got is year on year has grown double digit as well. And we are confident there’s some good significant deal over deal in our pipeline. There are, there are, I would like to say multiple hundred million plus deals that we’ve got. There is a. There are some 50 million deals, 20 million, 10 million. Let’s see how we can get to closure. The year is in play, the quarter is still in play.
Rajeev Gupta
Not fair point. I think we just try to understand. Because if I look Your organic growth Q4 would be double digit down and that’s why we try to understand how to think. Thanks again.
Amit Chadha
Thank you. Thank you sir. Thank you so much.
Operator
Thank you. Our next question is a follow up from Vibor Singhal from Nuvama Equities. Please go ahead.
Rajeev Gupta
Yeah, hi sir, thanks for giving me the opportunity again. Now assuming all the questions on the restructuring part are done, I’ll just focus couple of questions on the core business in which we are doing really well. So on the mobility side you mentioned that you possibly see a turnaround. I remember a couple of quarters ago we had discussed and you had mentioned that in the mobility vertical it’s a very interesting situation that in US the auto companies are kind of confused that they should go towards EV or ICE vehicles.
And the latest step by Ford is a testimony to that thing. And in Europe they are facing a lot of competition in the Chinese competitors. So what do you think has changed or could change in the coming quarter which gives you the confidence that this mobility vertical could be at the cusp of a turnaround? And secondly on the sustainability vertical, I think it’s consistently done really well for us. Is the plant engineering sub segment of that really doing good for us and do you think it will continue to do well going forward as well given the backdrop of the uncertainty around the talents?
Amit Chadha
Got it. So why don’t I request. Alan, why don’t you take the mobility question on US and Europe and then I’ll take the sustainability question.
Unidentified Participant
You know that the mobility segment for us is basically three different verticals auto traction of highway and arrow and rail. We do see the deliberateness coming in auto for sure. We do see the wins that we had done earlier ramping up now and leading to the growth that you are seeing or the growth that you are going to see going forward. Plus the solutions that we had built out in STV and we talked about those investment that we had done earlier, those are beginning to bear fruits. Now your question about the electrification and the others, you have seen some ramp down, you have seen some write offs happen by the large US automakers on the electrification side.
So that’s out in the open. But we see that the momentum on the STV still remains and will continue to power the growth that we have. Tnoh, as we talked about earlier is a little bit soft for now. But aero and rail, which again has been a market for us and growing especially on the engine manufacturer and certain rail companies, remain positive and we will see that trajectory grow as we go as we think about it in short term, long term to be played out. But we remain very positive about the. Sector as we see it.
Amit Chadha
So if I may, so US bottomed out. We do expect growth from year on and we have seen the deal and they have started ramping back up organically and like Rajiv said on the small one, less than 10 million number of these wins and on Europe what is happening is that they are taking out higher cost suppliers and they are moving that work to India. So not just us, others should also gain from Europe as we go forward. My second question, sustainability. See sustainability. The growth is coming from IP as well as pe.
Both of them. In fact PE is getting a lot more work in industrial AI and digital and physical AI and plant is getting work with a build out in lng, build out in oil and gas, build out in cpg. So both the areas are expanding for us and doing well.
Rajeev Gupta
Got it. CPG also you’re seeing good traction in CPG as well in terms of plantation.
Amit Chadha
Right now between CPG and oil and gas cpg there’s a little bit, you know, some project got over, another one is going to start. But oil and gas is chugging along. In fact we are diversifying into LNG and that we believe will be the next play in Middle east as well as Australia. So this Australia win we have had in LNG is good for us to create the credentials in that area and us. Anyway the work is going on in Europe in the digital part for oil and gas.
Rajeev Gupta
Got it? Got it sir. Thanks for taking my questions again and again. Wish you all the best.
Amit Chadha
Well, absolutely. Thank you so much.
Operator
Thank you. Ladies and gentlemen. We will take that as our last question. I would now like to hand the conference over to Mr. Sandesh Naik for closing comments. Over to you, sir.
Sandesh Naik
Thank you. Thank you all for joining us on the call today. We hope we were able to answer your queries. I know some of the questions will still be left, so we look forward to interact with you through the quarter and answer those queries. Wish you all a very good evening and a good day. Thank you.
Operator
Thank you. On behalf of L and t Technology Services Ltd. That concludes this conference. Thank you all for joining us. You may now disconnect your lines.