L&T Technology Services Ltd (NSE: LTTS) Q3 2025 Earnings Call dated Jan. 15, 2025
Corporate Participants:
Pinku Pappan — Head, Investor Relations
Amit Chadha — CEO & MD
Rajeev Gupta — Chief Financial Officer
Alind Saxena — Executive Director & President
Analysts:
Sulabh Govila — Analyst
Abhishek Bhandari — Analyst
Vibhor Singhal — Analyst
Ruchi Mukhija — Analyst
Nitin Padmanabhan — Analyst
Vikas — Analyst
Manik Taneja — Analyst
Karan Uppal — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Q3FY25 earnings conference call of LNT Technology Service Limited as a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then 0 on your Touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Pinku Pappan. Thank you, and over to you, Mr. Papan.
Pinku Pappan — Head, Investor Relations
Thanks Raju. Hello everyone and welcome to the earnings call of L and T Technology services for the third quarter of FY25. I am Pinku. 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 have 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 approximately one hour after the call ends.
With that, let me introduce the leadership team present on this call. We have Amit Chadha, CEO and MD Abhishek, Executive Director and President, 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. Let me now turn the call over to Amit.
Amit Chadha — CEO & MD
Can you hear me clearly? Thank you, Pinku. Let me start by wishing all of you and your families an amazing 2025 filled with happiness, prosperity and health. The last quarter Q3 has been a strong one. Let me share key highlights of our performance. Revenue grew by 3.1% in constant currency led by our tech and sustainability segments where the demand outlook has been steadily improving. Tech led the growth with 11.1% followed by sustainability with 4% in constant currency. Our go deeper to scale strategy under which we made focused investments in the first half of the current fiscal has started yielding early results visible in our deal bookings, growth and margins.
In Q3 we had the highest ever large deal bookings aided by eight deals across segments. 150 million deal, 235 million plus deals, 225 million plus deals and 310 million plus deals. We continue to see a robust addition to the large deal pipeline on the back of engagements and customers on both new age product and platform development and business transformation. In line with our aspiration, ebit margin in Q3 has improved by 110 basis points to 16.2% excluding nonoperation expenses on account of M and A.
Additionally, IntelliSwift acquisition was completed earlier this month. My compliments to Rajiv and the entire M and A team and IntelliSwift leadership. IntelliSwift will help us enhance our AI, digital and software product engineering capabilities and expand the addressable market for us, thereby offering us a higher growth trajectory in the future.
Over the years we have been building a platform to recognize and celebrate engineering innovation being done by our customers. In December we held the third edition of the Digital Engineering Awards jointly hosted with ISG and CNBC TVA team. I am happy that this time the event witnessed a record 230 plus nominations showcasing groundbreaking contributions. This prestigious platform underscores our commitment to innovation while fostering deeper client intimacy and vital industry collaboration.
Now let me take you through our segments starting with Mobility. First, the positives. We continue to see a growing deal pipeline in the key growth areas of SDV and hybridization. These There are a good number of consolidation deals in auto and commercial vehicles across all GEOs US, Europe and Japan. We won two large deals in Q3 one a vendor consolidation deal with global tier one and another with a new age OEM for EV product design. Aero and Rail are also seeing a gradual upswing with more deals in pipe. We are in discussion leveraging our AI based solutions that address operational efficiency requirements of airline and train operators.
Now let me address the challenges which are in addition to the furloughs that impacted us in Q3, select OEMs and clear ones are going through challenges and that is leading to pause in some projects and spending. There is weak demand in agriculture and construction sector due to uncertainty around potential changes in tariffs. Therefore, we declined by 5.2% in constant currency in Q3 with some parts of the portfolio doing well while others get got impacted. We are however not slowing down on technology investments. The cutting edge solutions we have developed for SDV like LTTS iDrive, which is our proprietary framework for accelerating SDV implementation are helping us win new engagements and expand our presence.
Overall for mobility we see a good number of large deals in the pipeline including at tier 1s and OEMs where vendor consolidation is giving us gains. We expect Mobility to show muted growth in Q4 but grow for sure and then pick up from Q1 onwards on the back of deals and new end programs that we are likely to start in the current quarter. So this segment will grow in the current and next fiscal.
In sustainability we had another strong quarter with 4% growth in both process and industrial firing. Well at industrial we’re seeing large deals in the pipeline in the 20 million plus and upward ranges. These are proactively created deals that are getting seeded by aligning with the customer’s business transformation linked priorities. For example, we signed a large deal with the US based machinery company with oil and gas sector that helped them on design and development of software and connected platforms. Within industrial the energy subsegment is seeing an upswing in spends especially in electric controls and microgrids.
In process segment we continue to see strong demand across ONG and fmcg. In project engineering and plant modernization, key clients continue to ramp up with us. We won a large deal to set up an integrated operations center for a European ONG major. In addition to plant engineering expertise, we will cross poly innovate our SWC capabilities as it involves setting up an integrated command center for the plants. We expect to win more of such deals cross leveraging segmental capabilities across our ONG customer base.
In another large deal, we expanded our engagement with an ONG major to enhance their operational processes by leveraging our offshore engineering centers. Within fmcg, we see strong demand for plant modernization digitization as customers want to improve operational predictability. Overall for the sustainability segment, we see an increased large deal pipeline both at process and industrial and expect the growth momentum to sustain.
In tech, we had a strong rebound with 11.1% growth led by comms, ISV Media and MedTech subsegments. In comms, demand is strong in the areas of network performance management, network monetization and AI driven automation. We signed a 50 million deal with a global network provider, again leveraging our SWC capabilities to provide product integration services and to leverage AI frameworks to drive automation. In the media subsegment we see product development and sustenance Large deal opportunities With a European media entertainment company, we won a large deal to design, develop and deploy next gen entertainment and broadband products worldwide.
In the MedTech subsegment, demand is being driven by Quora and Digital manufacturing where we are leveraging our factory of the future framework. We won a large deal with a global healthcare OEM to support them in complaint handling, remediation and supply chain optimization. Our software defined endoscopy solution in collaboration with Nvidia is finding good traction with OEMs and healthcare providers in SWC. We are building a pipeline in the Middle east where we see opportunities in smart city safety and security and smart operations.
We are quite optimistic on the ISV segment which is getting rolled up under the new sub segment called Software and Platforms as customers are spending heavily on new platforms and technologies. This will allow us to immediately have three hyperscaler accounts which are 20 million plus each with a wider footprint. Equally importantly, we will now be able to address a service led sector namely retail, Fintech and healthcare, which are new and promising markets for us. For example, the ER and d spend in fintech totals about $143 billion of which 8 billion is only addressed by service providers. Similarly, in retail there is a total spend of $47 billion out of which 4 billion is addressed and in healthcare a total of $400 billion is there of which only 14 billion is addressed. These new markets will add tailwinds to our growth as we look at FY26 and beyond. Overall, we see a good number of deals in play in the tech segment and expect growth to continue.
Now a few updates on our Technology and Innovation charter. Our engineers added a total of 54 patents in Q3 and our cumulative stands at about 1448 now in AI gen AI specifically we have filed 174 patents cumulatively. Second one highlight in our AI progress. We inaugurated an Nvidia AI Experience Zone at our Bangalore Design Hub aimed at enhancing AI capabilities for our clients in mobility and tech. We have started internal R and D Programs on AgentIQ AI, an autonomous system that enables automation, autonomous operations and will improve decision making.
With that, let me now provide color and discuss the outlook for the future. We are encouraged with the deal pipeline and a good number of large deals in 25 to 100 million plus range that we are closely tracking. These yields are across segments and have been seeded as a result of focused investments we have made at the start of the year into New Age technologies and leadership.
We expect all three segments to grow in Q4, 25 and beyond. For FY25 including in Teleswift, our revenue guidance is for near 10% growth while organically we’ll be near 8% and we continue to aspire for near 16% EBIT margin levels for FY25 organically. I want to reaffirm our ambition of building $3 billion segments and getting to a revenue of 2 billion with 17 to 18% EBIT margin in the medium term. With that I now hand over to Rajiv. Thank you and look forward to taking your questions later today.
Rajeev Gupta — Chief Financial Officer
Thank you, Amit. Good evening to all of you. I would like to start by wishing everyone a very happy New Year. We had a strong performance this quarter across all parameters, Deal wins Revenues, margins and cash flows. Deal wins like Amit talked about have been the highest ever margins in line with FY25 aspirations. We’ve seen improvement in DSO and free cash flows for the quarter have come in at record levels, and all of this despite the seasonality of quarter C and after absorbing annual salary increments.
Additionally, we concluded the acquisition of Intellisys positions us well for the future growth with hyperscalers and opens avenues for providing services in three new markets in the services LED sector namely retail, fintech and healthcare. With that let me now take you through quarter three FY25 financials starting with the P&L. Our revenue for the quarter was INR2,653 crores, a growth of 3.1% on sequential basis. Our year-on-year growth for quarter three FY ’25 came in at 9.5%. Gross margin came in at 29% after absorbing wage hikes and SG&A for the quarter came in at 10.3% of revenues, which is slightly lower than our expected range of 10% to 10.5% to 11% of revenues. Overall, we were able to improve the EBIT margin by 110 bps to 16.2% after excluding one-time non-operational M&A expense. This is in-line with our commentary in-quarter one and quarter two that H2 EBIT margin will be better than H1 on organic book of business.
Moving to below EBIT, talking about other income, other income was INR18 crores, lower on a sequential basis due to losses on hedge contracts resulting from USD appreciation. Effective tax-rate for quarter three was 27.4% in the same range as our expectations of 27.5%. Net income for the quarter was up 0.9% sequentially and came in at INR322 crores, which is 12.2% of revenue. If we exclude one-time non-operational M&A expense, net income came in at INR328 crores for the quarter.
Now moving to the balance sheet to highlight a few key line items. Our Q3 combined DSO, including unbilled, came in at 112 days compared to 116 days in-quarter two, an improvement of four days. Unbilled days were 18 in-quarter three compared to 17 days in-quarter two. We continue to improve this metric as we’ve mentioned in the past and now aspire for a target range of 110 to 115 days going-forward.
Now let me talk about cash flows. As a result of the improvement in DSO, our quarter three free-cash flows came in at a record level of INR638 crores, leading to year-to-date free-cash flows of INR965 crores, which is at 101% of net income. Our cash and investments stood at INR3,290 crores at the end-of-quarter three versus INR2,849 crores end-of-quarter two.
Now moving to revenue metrics. On sequential basis, dollar revenue growth was 1.7% in reported terms and 3.1% on constant-currency basis. Growth was majorly led by tech and sustainability segments. Now let me comment on operational metrics. The onsite-offshore mix was similar range as compared to quarter two. Offshore percent now stands at 58.6%. We continue to work on measures to improve to our aspiration of 60% for onshore/offshore ratio.
Client profile greater than $1 million showed a sequential improvement in 10 million, $5 million and $1 million category, the client profile will continue to improve in the coming quarters as well. Client contribution to revenue also showed an improvement in the top-five and top-10 categories compared to quarter two. We expect revenue from top customers to improve going-forward as we run targeted programs on client mining.
Our headcount for quarter three was 23,465 compared to 23,698 in-quarter two, while attrition remained stable at 14.4% levels. Realized rupee for quarter three were around INR85.06 to the dollar, a depreciation of around 1.4% compared to quarter two.
With that, let me provide an update on our recent acquisition, Interiswist. We completed the acquisition on January 3rd of this year. I take the opportunity to thank my entire M&A team of the promoters and leadership of Intelli Swift and of course, the LTTS leadership team to have seen the conclusion of this acquisition in a record time. To provide a recap on Intelli Swift, this is a company based in California with about 1,500 employees. Intelli Swift serves four of the top-five hyperscalers and caters to over 25 Fortune 500 companies, including five of the top-10 R&D spenders in software and technology. Starting November, we kicked-off an integration management program that will run for the next 12 months to identify and realize synergies on revenue and margins. Over the last two months of integration planning, we’ve already taken steps that have started to show fruition. One, to, to rightsize the organization; second, to augment leadership team with senior members from LTTS; third, by launching initiatives to improve margins; and combine ISV business of LTTS and to create a new sub-segment, software and platforms to supercharge growth.
As a business has annualized revenues of $100 million-plus and EBITDA margin in the range of 7% to 8%, this is post taking steps that I just outlined. We still see potential to further improve the margin to double-digit as we accelerate revenue growth and reduce SG&A cost by leveraging synergies with LTTSL.
Now let me give you some visibility on EBIT margin trajectory going-forward. During H1 FY ’25, we prioritize investments towards building leadership, technology solutions and capabilities ahead of the curve with the objective of capturing additional market-share, accelerating growth and improving quality of revenues. This was in-line with our strategy of going deeper to scale to pivot on revenue growth. Like I mentioned earlier, our H2 EBIT margins will be better than H1 and we continue to aspire for near 16% levels for FY ’25 for the organic book of business. Starting quarter-four, we will consolidate financials and expect an impact of around 150 bps on the EBIT margin. For Q4 FY ’25, at consolid level, we aspire for EBIT margin to be near 15% levels and will improve to mid-16% levels between quarter-four FY ’27 and quarter one FY ’28.
Before I conclude, I’d like to announce a change in our Investor Relations function. Pinku, as you all know, in addition to heading M&A for the company will assume a full-time strategic role of leading the integration management office of IntelliSwift as we build our software and platform business. We would like to thank Pinku for steering the Investor Relations functions for the last eight years and building relationship with the investor and analyst community.
I would also like to welcome Sandesh Nayak, who now assumes the role of Head, Investor Relations for LTTS. He will be connecting with the investor and analyst community starting this quarter. Sandesh joins us from a reputed industry house in the country with 20 plus years of experience in Investor Relations and treasury function. With that, I thank everyone, and I now hand it over to the monitor for questions.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on your touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question comes from the line of Sulabh Govila with Morgan Stanley. Please go-ahead, sir.
Sulabh Govila
Yeah, hi. Thanks for taking my question. Congrats on the good deal wins that we reported. And the question that I had is whether we should think of these level of deal wins as sustainable going-forward? And given the pipeline that you’ve had right now? And if you could also highlight what would be the average tenure of these deals versus, let’s say what we would have won last quarter?
Amit Chadha
So thank you. So this is Chatta. So the deal wins we’ve got, got this quarter, we report 10 million-plus wins. So this has been very robust, like we said, the best so-far. Do we expect this to continue? We do expect quarter-four to come in at similar levels because there is some deals in the pipeline that are expected to close-in the very near-future as we go-forward. Second, average tenure of these deals is about three years. One color I want to provide additionally is that three of these deals that we have won are based on our AI, Gen AI widgets and solutions as well as proprietary frameworks that we’ve established and launched in the last six months. Also the pipeline as we stand today is bulkier and better than it was same time last year, last quarter and we continue to operate. In fact, I had mentioned last-time that we had reinstitutionalized and organized our large deal engine. We have appointed a senior Chief Business Officer based in Dallas to run this function, beefed it up as well as provided extra hands and feet and people by segment in each of the segments that we’ve got to tailor-make some of these deals and propositions that we take to our customers. And we are seeing a fairly good regard of uptick from our clients in this area.
Sulabh Govila
Okay. Understood. My second question is on the automotive vertical. The outlook that we have provided for Q4 and beyond. So just wanted to understand you know what’s driving that confidence, given that you know a lot of peers have seen ramp-ups being delayed by clients on the deals, which have been won very recently as well. And in some cases, there have been project cancellations. So I just wanted to get your thoughts on the outlook that you provided here.
Amit Chadha
Sure. So for us, we actually track mobility, which is automotive, number-one. Number two is trucks off-highway as well as the agriculture segment. And third is aero and rail. Now what we saw in-quarter three happen was that there were furloughs that came in automotive as well as this of highway, not in aero and rail, right? We did win a couple of deals like I talked about. Now going-forward into quarter-four, though automotive will be something that will continue to be in a little bit of a stress, in my view for the next couple of quarters, not just 1/4, but because we work-in aero and rail and because we work-in trucks and off-highway, we will see the trucks part as well as the aero and rail part expand. So I’m confirming that you will see a growth coming back-in quarter-four in mobility, it will be — it will be — it will be there and the next year, it will continue.
Plus there is a number of large deals. There are consolidation opportunities as well as transformation deals in the pipeline that will help us., my colleague on the Board, can I add a little bit of color on what we are doing in mobility?
Alind Saxena
Sure. Thanks, Amit. So in addition to what Amit has said, we have invested earlier in our stack, which we call LTTS iDrive, which is primarily around the STV stack that we are developing. We are seeing increased traction and acceptance of that stack by our customers. In fact, a couple of wins that we have had have been around the solution that we have created. We recently also participated in CES where we had over the last four days, close to 120 customers come across and visit that. And we have achieved good acceptance of what we are doing. We remain fairly confident that the traction will continue. aero and rail just a minute on that both rail and aero, there is there is an increased engagement and particularly in the areas of testing and automation around some of the solutions that we have developed on AI that’s gaining traction. We continue — we accept that to continue over the next few quarters and fill-up the gap that we would have otherwise.
Sulabh Govila
Understood. Last is just a clarification. You know, the benefit that we were supposed to have on the Maharashtra cyber deal in terms of the milestone revenue booking, has that completely happened in this quarter or there is some bit of remaining in next quarter as well?
Amit Chadha
So it is for the program that we had on Maha Cyber that has been under execution under normal. As we go-forward and next quarter also, we will see ongoing revenues coming from our side.
Sulabh Govila
Thanks for taking my question. I’ll get back into the queue.
Operator
Thank you. Next question comes from the line of Abhishek Bandari with Nomura. Please go-ahead.
Abhishek Bhandari
Thank you to the management team and congrats on the deal for the acquisitions. My question is more on financials. So if I look at you know your segmental margins for this segments this quarter, there was a substantial improvement in the high-tech Reno margins. And also if you look at — yeah, I mean which would explain why this high-tech margin has jumped up almost 300 basis-points on a sequential basis.
Rajeev Gupta
Sure, Abhishek. This is Rajeev here. I’ll take that one. So see, in case of our tech portfolio, I mean, we did see that the EBITDA margins have been lower over the last few quarters and there was a focused effort in terms of improving margins in this particular segment, which led to operational improvement. In addition to that, within tech segment, we’ve seen in our medical sub-segment to be relatively higher, which has resulted in what you see almost about 300 bps of incremental margin sequentially in Q3 over Q2.
Abhishek Bhandari
Got it. And is it also reason why your fixed-price contribution went up from 37% to 41%?
Rajeev Gupta
Yeah. So see, I think we’ve talked about it earlier. We don’t — we don’t generally see benefits on account of a fixed-price or a T&M. I mean, they are fairly concentrated across portfolio. So I would not give color saying that if fixed-price increases, it will lead to additional margin.
Abhishek Bhandari
Got it. My second question, Amit, is to you. While you’re reconfirming, including interest and organic is around 8%. You know, the Q4 number, if my math is correct, is upwards of 6% growth. So is that confidence coming on back of some of the residual revenues from fiber projects of Maharashtra and from the immediate ramp-up of the project and the pipeline or is it anything beyond that?
Amit Chadha
So one is a little bit of background noise, but if I understand your question, it was where will the growth come from. So number-one, we expect all the three segments and all sub-segments to grow, right, number-one. Number two, we are aware of the ask rate of Q4 and we are comfortable at this stage in confirming that we will be able to meet that. Number three is that the deal wins that we’ve had in the last couple of quarters are giving us that confidence that we’ll be able to go-forward with it. So that’s where we are. Plus there is a little bit of seasonality that will come in or smart World that came in last year as well. So that’s good for us. And as you can see, the margins have improved. We’ll be able to take that forward as we move forward. In addition to that, there is an inorganic part of Intelli Swift that will get accounted in our books from January 3rd. And that will give us that upper-end of the guidance, that 10% number that we talked about.
Operator
Thank you. Mr. Bandani, please follow the queue for more questions. Next question comes from the line of Vibhor Singhal with Nuvama Equities. Please go-ahead.
Vibhor Singhal
Yeah, hi. Thanks for taking my questions and congrats on a very solid performance and a strong deal win. So Amit, I have one question for you and two after that for maybe. So I think the strong deal win as you have mentioned in the pipeline also appears to be quite strong. Any color on the conversations that you’re having with the clients in terms of their excitement or apprehension either ways with the new government set to take charge in US, I mean the macroeconomic data also has been kind of robust. So do you — are the client conversations happening around incremental spends in the R&D new pockets being opened up or is it still a tale of caution as we had seen in the last quarter, the pre-election caution and will be sometime before we are over that?
Amit Chadha
Yeah. So there are — there are certain areas that are cutting across, if I may, or that we are seeing growth trends in. So AI, Gen AI, we continue to see increased traction of work going on. In fact, we are ourselves investing now in agentric AI. And when I come back-in April, I’ll give you a little more color on that as we move forward. Second, software-defined everything and next-gen software is something that people are continuing to invest and do projects in. Third, industrial automation is attracting with digital-to-end, digital threat is attracting spends and budgets for this year. The of supply-chain continues and therefore plant as well as oil and gas continue to see that demand. There’s another area we are starting to see green shoots is compute and embedded hardware and I will start quantifying these as you go-forward in some of the project wins that we do in the subsequent quarters. And finally, there is consolidation and transformation deals that are there in the pipeline.
Now when I look at the commentary that people are making right now, see, and I’ll go segment-by-segment, if I take the tech segment, barring a couple of Semcon majors which are publicly known to have issues, we see growth to continue in that area in the tech segment with — and medtech as well as well as the comm media tech area. If I move to sustainability other than certain parts of industrial machinery that we believe are a little bit slower, but oil and gas, chemicals, electrical power, data center power, et-cetera, continue to spend. When I look at mobility, automotive is under stress and I am acknowledging that. However, trucks and fleets and aero and rail continue to invest as we go-forward. And then there are sub-areas, et-cetera. So I’m fairly confident and comfortable in saying that FY ’26 will be a better year than FY ’25.
Vibhor Singhal
Got it, got it. Thank you so much for that elaborate answer. And just to reject, you don’t see any geopolitical impact at least on the verticals that you mentioned and you expect the momentum to continue in those verticals.
Amit Chadha
See, we are — we are a global company globally at local. See, the Intelli acquisition has given us another 500 employees just in the US, mostly local citizens. We continue to provide local offers and continue to work on that, providing local offers in the US, in Europe, in Japan. We’ve got recruitment engines that are sitting there that do that. And I’m fairly comfortable at this stage unless something comes along tomorrow that I haven’t thought of. At this stage, we are fairly comfortable where we are sitting for CY ’25 and FY ’26.
Vibhor Singhal
Perfect. So glad to hear that. I just have two follow-up questions for Rajeev. So Rajeev, on the margins front, a very strong performance in this quarter. Just wanted to pick your brain a bit more. I mean, this quarter, we had growth driven by ROW and India, which we would typically associate with maybe not as
High-margin projects as maybe US and Europe, and this quarter also had the wage hike impact. And despite that, we have not just been able to expand our overall margins, but also gross margin. So could you just provide some color on that and how should we look at it going-forward as well on the organic basis?
Rajeev Gupta
So Vibor, to address, right I mean, we did mention in our Q1 and Q2 commentary that our H2 margin will be better than H1, right? So we had prioritized investments in H1, both in Q1, Q2. Some of these investments have yielded results, both in terms of revenue and margin as well, right? And we continue to see the deal wins that Amit articulated. Now if I were to really look at summarizing the entire year, I have shared the aspiration that we will want FY ’25 to come in at near 16% EBIT levels. We continue to work upon that. That remains our aspiration. Now if I look at as a combined business, right, and just to clarify the overall question, because we are going to consolidate Intelli Swift. I’ve also highlighted that we will come at that near 15% level. Now if you look at the breakdown, gross margin came in at about 29%, right, which had probably about 100 basis-points of wage hike impact. We were able to absorb a large part of that and hence you saw gross margin come down by about 30 bps. I think there is still possibility of improving. We still have avenues around quality of revenue, improvement in pyramid, operational efficiency.
On the SG&A side, you would have already seen it come at about 10.3. Our aspiration is to maintain between that 10.5 to slightly over those levels. So there are, of course, opportunities that we still continue to work towards to see the aspiration realized for FY ’25 on the organic part of the business to come closer to or at about 16% levels.
Operator
Thank you. MR. Singhal, please rejoin the queue for more questions. Next question comes from the line of Ruchi Mukija with ICICI Securities. Please go-ahead.
Ruchi Mukhija
Hi, my questions were answered, but picking your brain, can you give us puts and takes now which went to this quarter’s margin.
Amit Chadha
So I would highlight two to three things. One, of course, the growth in revenue. I mean, growth quality of revenue always helps us to be able to continue to improve margins. That was one. Second, we had mentioned Q1, Q2 that we are going to make investments. Those are planned investments in terms of building leadership, in terms of building solutions and capability. Some of those investments have certainly yielded results and we are not seeing those levels of investments in-quarter three, of course, which leads to improvement. The third is, if you look at the increment that we had planned, close to about 100 bps was the impact of the increments. The increments are rolled-out effective November 1. So it was not an impact of a full-quarter. And I think given the fact that there were a lot of operational improvements, I talked about specifically in terms of tech business, all of these three put together certainly help us in terms of improving the margins.
Ruchi Mukhija
Next quarter, do we see a ramp-up of the large deal win adding some cost burden
Amit Chadha
See, we’ve been seeing large deal wins in the previous quarters also. So I think the blend of the existing business as well as the new business, I think that’s working quite well. So we don’t see an impact because of large deals ramp-up in the coming quarters.
Ruchi Mukhija
And the last bit, in our mobility vertical, could you specify how much is the automotive exposure, a ballpark would also do to distinguish how much that good growth portfolio versus area where we are facing challenges?
Amit Chadha
So we don’t normally provide the breakup between auto, TNVH and Aero, I know what you’re trying to do, ma’am, you’re trying to figure out as to what will be the percentages. So let me assure you that mobility will grow on the back of some of the deal wins that we’ve had plus Aero and Rail mam and Q1 onwards, I do believe that auto with the wins we are having will grow again, that’s where we are. So it will be lower-growth in mobility. I mean we again working on the quantum, the quarter has not done yet just started, but quarter one onwards will be regular growth. But I’m confirming that there will be growth in mobility in-quarter four, ma’am.
Ruchi Mukhija
Thank you. All the best.
Amit Chadha
Thank you, ma’am.
Operator
Thank you. Thank you. Next question comes from the line of Nitin with Investec. Please go-ahead.
Nitin Padmanabhan
Yeah, hi, good evening. Two questions actually. So one is on the margins. So to achieve the 16% organically, basically you need at least 80 bps margin expansion next quarter. But I think you’d have a 50 bps headwind from wage hikes as well and if that’s uniform and obviously, there is a SWC pickup, which is also a headwind to margins. So just wanted your thoughts on what will drive this in Q4? Thank you.
Amit Chadha
All right. Sure, Nitin. So let me clarify. I think what you said in terms of the seasonality of the SWC business is correct. I mean, we tend to see SWC business to be higher in H2 relative to H1. And yes, I think there has been a conscious effort in terms of improving margins on the SWC business as well. So it’s not going to be as much of a headwind compared to what we saw in the previous year. Having said that, there are a lot of tailwinds that we continue to operate with. One, of course, the growth, I talked about the quality of revenues. That will be a positive factor-in quarter-four as well. The second is, I think levers like optimization of pyramid, offshoring, operational efficiencies, these are all areas that we look at in terms of seeing the margins that we aspire for. I think the — I mean the math part that you talked of, maybe I’ll request you if you can talk offline to Pinku and Sandesh because we don’t believe that will require us to see the margin uptick to that level, but you can certainly take it offline. Like I said, we continue to aspire to come near to 16% level and we believe we’ve got a fair bit of comfort level around it.
Nitin Padmanabhan
Right. A clarification on — earlier you mentioned EBIT margins will be near 15% levels and improve to mid-16% between Q4 FY ’27 and Q1 FY ’28. Did I get that right?
Amit Chadha
Okay. Okay. So thanks. Thanks, Nitin, to bring it up. Let me clarify, right? The aspiration for FY ’25 on the organic book of business is near 16% EBIT levels. That’s one. Second, we are going to consolidate Intelliso business beginning quarter-four. The acquisition concluded on January 3rd. As a result of that acquisition, we will see an impact of 150 basis bps on account of that business. That business is a $100 million annualized business with an EBIT margin range of 7% to 8% and we aspire for quarter-four as a combined financial to come near 15% levels, right? So that’s the second one. In terms of the integration plan that we put over the next eight quarters, we see the overall consolidated financials to improve to mid-16 level — mid 16% levels between quarter-four FY ’27 to quarter one FY ’28. So I hope that’s clear, Nitin. I just wanted to break-down. There are three steps to it.
Nitin Padmanabhan
Yeah. Yes, yes, absolutely clear. Thank you so much for that. And just one last one is on the automotive side, it would be great to have your views on how you’re seeing customer behavior across the three regions, which is the US, Europe and Asia. How are you seeing relative demand across those three regions and how do you see recovery between those regions?
Amit Chadha
Yeah. So Nitin, thank you. Nitin, two things here. I will address automotive, but my friends and colleagues in sustainability and tech are starting to feel very ignored and bad. So I’ll address that as well for you from a demand standpoint. So automotive, look, if you look at it, from a spend standpoint, I do expect that ones are in a clear challenge and a challenging environment globally across the regions. And no one region is better than another and you’ve seen this play-out with various results, etc. Now if you look at OEMs, I do see the West Coast OEMs continuing to spend and the Retroit majors are also making — making room in terms of expansion. There are a couple of European OEMs that are continuing to spend and in the software-defined vehicle area, right? Let’s be clear. And Japan seems to be a little resilient as well. So do I expect automotive to come back to a rebound very quickly? No. If I was looking at a crystal ball, I think that it will be quarter two of next financial year when you see that something meaningfully coming back-in that area.
Having said that, industrial is growing. The supply-chain region, the new plants coming up, the industrial automation is actually fueling a lot of opportunity growth and pickup in the sustainability sector that we Call-IT, which is discrete in-process manufacturing. We also see the tech spends coming back and are back already. So MedTech as well as comms, media, semiconductor, consumer tech, hyperscalers actually spending very well. Barring a couple of Semcon majors, Semcon also is spending. So I would request when you build a model to keep that in view because that our world of three segments and trying to build $1 billion in each is what I would focus on, on given that we are cross — poly innovated across and therefore, we’ll be able to weather the storm of automotive, which is a small part of our entire portfolio in a much better manner.
Operator
Thank you. You. Thank you. MR., please rejoin the queue for more questions. Next question comes from the line of Vikas with Antique. Please go-ahead.
Vikas
Hi, sir. Thanks for the opportunity. I have two questions. First, following the acquisition of Enterm Swest, we were confident of achieving an organic growth of 8% to 10%. What factors have led to this revise in outlook that now we are expecting our organic growth to be closer to a lower range that is around 8%. And my second question is, in the previous quarter, you mentioned election led uncertainty and macro led to — has had some impact on deal booking. Now that Q4 deal bookings are similar to Q3 is what you believe will happen. Is that primarily due to catch-up from the first-half where closures were weak as previously indicated or this is more structural? Thank you.
Amit Chadha
Thank you. I’ll answer the second question first. So deal wins, yes, in H2 are stronger than H1 and see, we made some investments in H1 and that has helped us in build the differentiators further that is helping us with the wins in H2. And given where the pipeline is right now, I do expect current levels or similar levels going-forward to stay. So that is point number-one, plus the structural changes we have made in terms of creating more pipeline, et-cetera. On the first part, look, when we came to you at the beginning of the year, we had told you clearly we are at between 8% and 10% and we had also stated that we will have to sell-in the year to be able to get to that 8% to 10%. Now some deals get delayed at times and an automotive slowdown was not anticipated at the level that the automotive slowdown has happened, right? But every year you go through something will fall-off, something will fall on, this happens and that’s why there is a range. So I am actually pleased that we are within that range that we are coming in at. In addition to that, if you remember, we had an aspiration to get to that 1.5 billion run-rate, which is organic plus inorganic and we are pivoting on growth. I actually would like to call-out and I am surprised I didn’t see any questions coming in that area. But see, we had been missing, if you ask me in the tech-led — the service-led ER&D, which some peer group companies have been leveraging fairly significantly. The service-led ER&D, which is in fintech, retail and healthcare is actually another area that will show expansion in promise. Now it will take a little bit of time and that’s why I said that as I look at FY ’26, I look at FY ’27, our own models for right up to FY ’31, we do see that becoming a contributing factor of growth as we move forward and that is an additional channel your company has opened with the Intelli Swift acquisition.
Vikas
Thank you. Manish. Thanks a lot. Thank you so much.
Operator
Thank you. Next question comes from the line of Manik Taneja with Axis Capital. Please go-ahead.
Manik Taneja
Hi, thank you for the opportunity and congratulations for the steady performance. Just wanted to prod you further with regards to an aspect that you’ve highlighted with regards to a factor that aided your — your margin performance in terms of the quality of revenues. What would that imply? Is there some element of milestone-based revenue recognition given what we see from your geographical breakup of revenue? Is that the way to essentially understand that? And the second question was with regards to SG&A expenses. We went through a significant investments in first-half. How should we be thinking about this cost on a go-forward basis over the next four to six quarters?
Amit Chadha
So, Manik, let me take your question on SG&A first, right? See, we’ve talked about a range and in-quarter one, quarter two, we were ranging more towards 11.5% of revenue for our SG&A costs, right, that has now come down to almost 10.3% levels. What I would guide is to factor a range of between 10.5% to 11% for our SG&A cost because we will continue to look at opportunities, right? So it’s always going to be a continuous effort. Now coming to the margin part, right? I think I articulated the factors that helped us in terms of improvement in margin. One, the fact that, look, there has been growth — a decent growth that we saw in-quarter three, which by the way, is a seasonal quarter, right? If you were to ever compare previous years, I mean, Q3 is a tough quarter to navigate, but we have indeed seen a growth coming in this quarter. And of course, when I talk about quality of revenue, it essentially means that these investments that we called out in H1 have yielded benefit, right? A lot of these projects are basis new technologies that we’ve been able to take to the customer and offer them as solutions and capabilities, right, which has led to higher deal wins and of course, growth in segments such as sustainability and check and within that, particularly industrial and medical, which are our high-growth segments have started to show improvement. I think we called out in addition to plant engineering, industrial is showing promise and that indeed is happening. Similarly, in the tech segment, medical is continuing to show promise from here on. And those are few factors that have aided in the margin, right? To me, again, bunching it all together, this is what I really call about the quality of revenue, which helped us on the margin side. Going-forward also, much like what Amit talked about in terms of the growth aspiration to be between 8% to 10%, that should aid us in-quarter four in addition to a lot of the operational efforts to improve margins.
Manik Taneja
Sure. Thank you. And second question was with regards to the way we are seeing our headcount metrics trend. We’ve been — while we’ve been talking about a higher fresher intake through the course of the year, when I look at your headcount addition has been very muted through the course of FY ’25 year till-date, how should we be thinking about this metric going-forward given the strong deal activity and your expectations of growth pickup across multiple — across almost all the segments?
Amit Chadha
And actually, if you ask me, there are a couple of things that have fundamentally changed in the industry over the last couple, 3/4, maybe six quarters, et-cetera. See, if I — I’m going to tell you that our headcount has been flat year-on-year. We’ve still delivered year-on-year 8.7% in constant-currency terms, right? Now where do we go from here? I can tell you that the way we are right now, we’ve been able to — so it’s not just improving our utilization, it is A, improving our utilization; B, there is a lot more automation, AI that is being leveraged for operations. Third, there are widgets, etc., that we are being able to use, right? So that — therefore, if you look at it, we stopped — we stopped providing utilization at some point because we said it’s no longer a relevant metrics. I’ll be honest with you, I don’t think that adding headcount in our industry is going to be a lead indicator of growth anymore. If anything, lead indicator of growth is going to be TCV intake as you go-forward. Also companies that continue to invest in technology will continue to survive and thrive because the old business is going away. So if I look at next year, right, and I say that I’m going to do better than current year, please don’t expect headcount to get added drastically, though there will be headcount addition. There is a non-linearity that is coming in the revenue growth aspect, given automation, giving all these aspects and you will continue to see that play-out not just with LTTS, but the industry in general. Having said that, we are reiterating our commitment to add 2,000 plus freshers in FY ’26, work is already underway that like Rajiv said will help us in the pyramid further and we will continue to work on various other optimization measures, including increasing offshoring, increasing managed projects, leveraging our widgets, etc to improve the margins and unlock further value for customers and then for ourselves as well.
And some of you that were there in the IAD would have seen some of the tools that we showcase around AI. In medical, we showcase tools in software-defined lifecycle that is allowing us to be able to execute and testing, that is allowing us to execute projects with lesser headcount thank you.
Operator
Thank you. MR. Taneja, please rejoin the queue for more questions. The last question comes from the line of Karan Opal with PhillipCapital India. Please go-ahead.
Karan Uppal
Yeah. Thanks for the opportunity. Amit, just wanted to check the outlook on oil and gas sub-segment. The incoming US President is quite vocal of increasing the crude oil production levels, which ideally should be beneficial for this vertical in terms of brownfield and greenfield investments. So how are you thinking about this from year perspective?
Amit Chadha
So Karan, I did mention during my commentary as well that oil and gas chemicals will continue to grow. They’re not just not just that they are doing more drilling or any of that, but there is the output is changing. The chemicals that are coming out of these refineries now as an output is different than it was five years ago, seven years ago. So there is upgrade of plants happening, the whole supply-chain is being chained there and that is again creating work for ourselves. We are very actively — in-spite of headcount being flat, we are very actively hiring in the plant engineering segment. We are also seeing a lot more digital thread, digital twin, industrial automation work coming out in the oil and gas chemical area. And I expect this to continue through calendar year ’25 and beyond, and I see an upside there.
Karan Uppal
Okay. Thanks for that. Secondly, on auto vertical, so LDV HDV was believed to be a big growth driver for the R&D players. So do you believe that this opportunity, the large deals in SDV is pushed back by a few quarters due to the stress in OEMs?
Amit Chadha
Yes. So what’s happening is see the spends are there, but like my colleague talked about, Alan talked about that some of these model years that were being developed, they have decided to push the model. So whatever features they were thinking they will develop for model year, let’s say, 27 or 28, they are pushing it out to model year 30. So if they push it out to model year 30, that means that they will take another two years, so they’re not going to be able to spend that money. That is one, right? Second, there was a lot more focus on electric hybrid that was happening and that has sort of caused right now because given the change in direction potentially that may come in US, Europe, US and Europe relaxes the conversion rules, right, by a few more, let’s say, three more years. So they get three more years to do that. Third, nobody is talking about it, but we’re seeing early projects coming out in range extenders. So earlier you would have hybrid means you’ve got an ICE engine and then you’re going to have an electric motor with it, think about the other way around where you actually have an electric stackup and you’ve got a fuel engine or a gas engine that’s a range extender that allows you to buy the vehicle and then drive it not just in a suburban area, but also in the rural area. So a lot of that discussion going on. See, we were at CEO, like my colleague said, there’s a lot of new advancements, but then you need paying customers and I believe that give it a couple of 3/4, a lot of excitement in new models, but will take a little bit of time is how we see it.
But having said that, a lot of that what is happening and those that were at CES or saw the commentary will realize where last year, CES was largely automotive. This year CES was balanced around automotive, around off-highway, around consumer electronics, around healthcare as well as industrial and AI, of course. So it is a very balanced experience. I would actually recommend that you do get some notes on CES. We’ll be happy to talk more about it, but it will give you the color and complexion of how the world will grow beyond automotive and in-spite of automotive.
Operator
Thank you. Ladies and gentlemen, due to time constraints, we have reached the end of question-and-answer session. I would now like to hand the conference over to Mr Pinku Papan for closing comments.
Pinku Pappan
Thank you all for joining us on the call today. We hope we were able to answer your queries. If there are any follow-ups, we’d be happy to address them. With that, we are signing off today and look-forward to interacting with you through the quarter. And I wish all of you a very good evening and a good day. Thank you. Bye-bye.
Operator
Thank you. On behalf of L&T Technology Services Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.