Overall demand environment is very robust, says MindTree CEO

Mindtree shares on Friday dropped as much as 5.6 per cent to ₹4,477.3 on BSE even after the IT firm released its results for the third quarter after market hours, the previous day. Debashis Chatterjee, Chief Executive Officer and Managing Director of Mindtree spoke to Business Line’s Venkatesha Babu on the performance and growth of various verticals, demand environment, geo footprint and talent attrition.

Despite a decent set of numbers, why this kind of reaction from the market?

The market has its own mind. But as far as we are concerned, our overall growth story which we have been on – over the last five quarters – and it’s not just growth, it is profitable growth because our margins when the management takeover happened was not at best. And we recovered from that we improved the margin significantly. And once we reached 20 per cent, we decided that we needed to sustain this margin because we felt that is right for the business so that we could reinvest back into the business as we go along. So, from that perspective, if you ask me, I’m very happy with the growth story as well as the margin story that we have.

The last quarter was stellar, because we had some uptick in the previous quarter. But that doesn’t mean much, because on an overall year-on-year basis if you just look at the Q3 performance, we grew 34 per cent year over year. So, it’s an overall very good story. The last four consecutive quarters of 5 per cent plus sequential growth and constant currencies also. Fantastic story. So overall, I’m very happy with the growth.

How do you see the overall demand environment? Does it continue to remain robust? Is there a little bit of softening? How do you see things evolving from here?

The demand environment is reflected in the pipeline that we have in our business. It continues to be an all-time high as we speak. And when you look at the specific order book for this particular quarter, there are seasonalities also in terms of the order book to some extent. But if you look at the Q2 orderbook, it is 15 per cent up year on year.

So it is grown compared to the last year same quarter. And the same way, the YTD Q3 order book, which is at 1.2 billion is up almost 22 per cent from the previous fiscal same period. So, the overall order book has done well. But one thing which we are seeing right now is the kind of work that we do; It’s more in the digital transformation where we are helping clients to maximize their revenues. So, in that situation, many of the digital transformation opportunities are iterative and delivered over multiple sprints. So, sometimes, though you have a strong pipeline, that may not reflect in the order book all the time the way you want.

But if you look at the overall macro scenario, we are very bullish in terms of our demand.

There were some concerns around the travel and hospitality vertical because of all the pandemic related issues. Have those been completely addressed?

Almost 17-18 per cent of our revenues before the pandemic came from travel and hospitality. We had a significant impact during the first time when COVID hit us. But the good news is, we never really lost any of the clients; the clients ramped down, but we stayed very close to the clients because we also know that when this kind of an event happens, the industry which gets impacted the most, they are the ones who have to reinvent their souls and reimagine their business models the first.

Like contactless travel, for example. So those are some of the things that we have been participating in various transformation initiatives with many of our travel clients. That has been helping us in terms of getting back to the clients and growing the portfolio as the clients are bouncing back. The overall TTH has reached a run rate of $200 million, which is better than the pre-pandemic levels.

Within the three broad buckets of BFSI, Retail CPG and Communication Media Technology, what are the cylinders firing for you? How do you see a demanding environment there?

BFSI was, again, a good landmark. We crossed the $250 million annualized run rate. We saw some consolidation among our clients, which slowed down our growth to some extent. But over the last two, three quarters, we have got the momentum back. And most of the growth in BFSI is driven by clients trying to realign their technology portfolios, accelerate the adoption of future technologies, modernize their legacy infrastructure, reimagine their channel strategy, so on and so forth.

CMT has grown fairly well. It has grown almost 25 per cent year over year, and we have been helping OEMs accelerate the 5G offerings, IoT platforms and EDGE devices etc. And as far as Retail, Consumer Goods Manufacturing is concerned, we saw marginal growth sequentially on the back of a sold Q2. But on the y-o-y basis, we grew at almost 52 per cent. So, it has been good traction in consumer experience, core modernization, supply chain transformation, smart factory solutions, the capability that we have inherited.

Mindtree earlier had large exposure to a single client, contributing to close to a quarter of your revenues. How has that changed over time and have you succeeded in your journey?

This has come down. When we had the pandemic, the largest client revenue had almost become 30 per cent of the company’s revenue that has gradually come down to 24 per cent or so as of this quarter. This is not one client; there are multiple levels of business within this large client. So, I look at it because it’s a combination of multiple LOBs within the client, which is a large client for me. I want my largest client to continue to grow. But I want to grow the rest of the portfolio much faster. And that is something which is reflected very well in this quarter results. Our top client, this has grown 17 per cent year over year. Whereas if you look at the 2 to 20, that is the next 19 clients, they have risen 41 per cent year over year, which means that large plant is growing, which is great; but I’m able to raise the rest of the portfolio faster.

Retaining talent has been a challenge for everybody, and Mindtree reported attrition of 21.9 per cent. How do you plan to tackle this?

I think the challenge is pretty much at the macro-level, but having said that, you have to have interventions. So, there are a few things that we have done. We realized that this is a great opportunity for us to increase the fresher intake and balance the fresher and lateral intake to some extent. We almost want to make it, over a while, almost equivalent number of laterals as well as freshers joining every year. So, there is a tremendous amount of emphasis we have put on the fresher hiring – not only from engineering colleges but freshers from BSC, BCA, so on and so forth. And that program is pretty much in place.

(additional inputs by BL Intern Haripriya Sureban)

Published on


January 14, 2022

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