Good time to buy LTM shares post-$186-million Randstad deal? What brokerages say

IT services firm LTM's shares took centre stage on Dalal Street on Monday after the Mumbai-based software exporter issued an offer to acquire the technology and consulting services business of Neterlands-headquartered staffing giant Randstad across five countries -- France, Germany, Belgium, Luxembourg and Australia -- for $185.83 million. LTM said the deal is expected to add more than $500 million to its annual revenue.

The acquisition will involve Randstad's technology and consulting services businesses across France, Germany, Belgium and Luxembourg, and its near-shore delivery centres in Romania, Protugal and Australia, according to LTM.

LTM shares were last seen trading 1.0 per cent lower at Rs 3,969.1 apiece on BSE, having gyrated in a 3,901.5-4,005.6 range in intraday trade in the first half of Monday's session.

Brokerages maintained their neutral to positive views on the company, with analysts noting that the acquisition is aligned with LTM's five-year strategy. The target prices of at least two brokerages point to an upside of as much as 31 per cent from the previous close.

LTM issues offer to acquire Randstad’s tech & consulting services business in Europe and Australia

LTM said it has issued an ooffer to acquire Randstad’s technology and consulting services business in Europe and Australia to scale domain-driven solutions and AI services, as part of a 360-degree partnership with Randstad.

LTM said that the acquisition will expand its presence in key markets, primarily across aerospace and defence, automotive, utilities and BFS spaces, augmenting its global AI-centric capabilities with local domain and near-shore expertise crucial for delivering digital and AI transformation for customers in a sovereigncompliant and scalable model.

How brokerages view LTM-Randstad deal

JPMorgan downgrades LTM to 'neutral', cuts target by Rs 600

JPMorgan revised its rating for LTM to 'neutral' from 'overweight' and cut its target price to Rs 4,500 from Rs 5,100 per share, stating that revenues of Randstad’s technology and consulting services business in Europe and Australia have declined sharply in the past two years.

The brokerage's analysts also noted that the business operates at much lower EBITDA margins of 4-5 per cent given its onshore-heavy nature, which should be materially margin-dilutive for LTM.

While the management see any earnings per share (EPS) dilution across three contracts, the acquisition alone could drive 2 per cent EPS dilution due to amortisation costs and lower interest income, according to JPMorgan.

The price of the acquisition, it noted, appears to be modest at 160 million euros on an EV-to-sales basis (0.34x), but not on implied profit multiples (8x EBITDA, 13-15x EBIT), given the global or EU peer multiples.

HSBC maintains 'buy' call with Rs 5,250 target

According to HBSC, the European business scale-up and stronger presence in Australia banking are expected to aid medium-term growth for LTM.

The brokerage also noted that the Randstad acquisition is aligned with LTM's five-year strategy.

At the current level, LTM shares have lost 10.8 per cent of their value so far this year, in line with an 8.3 per cent decline in the Nifty50 though better than a 23.3 per cent fall in the Nifty IT.

LTM has a weightage of 4.8 per cent in the IT index.