At a time when most companies are making efforts to improve their utilisation rate, LTIMindtree wants to focus more on growth. The company saw its utilisation improving to 86.6% in Q2FY24.
Speaking to FE, Nachiket Deshpande, COO, LTIMindtree, explained that the ability to maintain utilisation is also a function of growth. “We want to be a high growth company so we can’t be at a 90% utilisation,” he said, adding that improving utilisation further will just barely give a company enough to accommodate for leaves of employees and other things. The company will also have almost no bench in that situation.
Deshpande said, “We are a growth company and we’ve always maintained that we would like to be in the top quartile of growth quadrant. If you want to grow faster than the industry, you need to invest in capabilities ahead of time, having resources available to take advantage of that and deploy them in the engagement.”
He believes that to be a higher growth company, utilisation at 85-86% is optimal at the company’s current size. “If you look at LTI alone or Mindtree standalone, we were guiding for 80-82% because that time we were a 45,000 to 50,000 people company. Now, we are a 85,000 people company, and every percentage of utilisation gives me thousand resources.” That’s why the current rate is optimal for us, he explained.
The firm said it will use other operational levers, other than utilisation to improve margins that has been dragged down by 70 basis points to 16% in Q2 after taking the impact of employees’ annual wage hike cycle. LTIMindtree expects to exit this fiscal with an operating margin of 17-18%.
Deshpande said, “We saw an about 200 basis points impact in margin in the quarter when we rolled out wage hikes. But we were able to recover almost 130 basis points of that in the same quarter itself. The reason is our margin optimisation programme, which we launched after the merger, has started to kick in and that kind of gives us the confidence that as we will now absorb the wage impact in the subsequent quarters.”
LTIMindtree is focusing on productivity as well as looking at its cost pyramid. Both are an important element that goes into improving margin. He added the company onboarded 1,400 frehsers in the just concluded quarter.
This is an element that will help in the cost pyramid productivity, added Deshpande.
“Cross skilling, upskilling will help in improving margin. Even higher number of managed services, higher number of consolidation type of deal give us the ability to train and cross train people better, and that gives us a better way of managing pyramids.”
