L&T Technology Services (LTTS) posted Q1 FY27 revenue of ₹2,940 crore (up 11.5% YoY) and net profit of ₹357 crore (up ~13% YoY), with EBIT margins improving 200 basis points to 15.7% — and free cash flow conversion hitting a striking 153% of net income for the quarter.
Revenue up 11.5%. Profit up 13%. Good numbers. The market agreed — LTTS shares jumped ~6.5% the day after results.
But here's what a CFO zooms in on: free cash flow conversion of 153% of net income. That single stat is more telling than the headline profit figure.
Free cash flow (FCF) is what's left after a company earns its profit AND pays for the capital it needs to keep running — things like equipment, infrastructure, working capital. FCF conversion = FCF ÷ Net Income. A ratio above 100% means the business is actually collecting more cash than its accounting profit suggests — usually because non-cash charges like depreciation are adding back to cash, and because receivables are being collected efficiently.
For a services business like LTTS, there's no factory to fund. But there IS a working capital clock — engineers bill clients, clients pay on 80–85 day DSO (Days Sales Outstanding — how long it takes to collect a rupee billed). When that clock tightens, cash piles up faster than profit does.
A CFO would ask: is 153% repeatable, or is it a one-quarter blip from a big receivables collection? Management guided full-year FCF at 90%+ of net income — so they're signalling Q1 was exceptional, not the new normal.
That honesty is itself a green flag. Companies that guide conservatively on FCF usually have CFOs who understand the difference between earning profit and generating cash.
📚 Learn the concept: Free Cash Flow
▶ Play the 90-second CFO game All daily posts