Mid-sized IT firm Mindtree on July 13 delivered a record performance in the first quarter ended June 30, 2021, with an order book of over half a billion dollars, the highest-ever in the company's history.
The firm also reiterated the FY22 guidance of "industry-leading double-digit growth" and earnings before interest, taxes, depreciation, and amortization (EBITDA) margins of above 20%, though the CEO and MD Debashis Chatterjee pointed to certain headwinds.
Here's what the Mindtree CEO said on key issues post the Q1 earnings:
Chatterjee told CNBC-TV18 that the demand pipeline is very robust and that the company had some renewals, which he said, potentially increase the scope of opportunity with clients. “Many deals are multi-year opportunities," he said.
According to the Mindtree CEO
, the company’s 4x4x4 strategy has helped it cross-sell and upsell to clients.
He added that the company’s Q1 order book has traditionally been good but the order books can vary quarter to quarter. “The demand and momentum give us confidence that we will have a good order book for FY22," Chatterjee asserted.
Mindtree had closed FY21 with an order book of $1.4 billion, which was its highest ever.
Growth and margins
After Mindtree reported an EBITDA margin of 20.3 percent and an EBIT margin of 17.7 percent for the quarter, Chatterjee said the company is confident of industry-leading double-digit growth.
"We have put a robust process of margin improvement,” the Mindtree
CEO said, adding that the company is investing in hiring, building client-specific capabilities, especially as clients are opening up discretionary spending to boost revenues.
Mindtree, which offered a wage hike in January, is set to roll out the second round of hikes in Q2 of FY22. "The wage hikes will be in line with the industry," Chatterjee said.
As the company saw attrition inch up to 13.7 percent from 12.1 percent in the previous quarter, the CEO called it an industry phenomenon.
“We are keeping an eye on attrition, at this point, it is manageable," he said, adding that the firm is taking initiatives for employee engagement.
Banking, financial services and insurance (BFSI):
While Mindtree saw delays in closure in some BFSI deals in the March quarter, the CEO said the sector is now witnessing a revival and the company is confident the vertical will continue to grow.
"BFSI has gone through consolidation in the last fiscal. We saw some client consolidation happening in our BFSI portfolio," Chatterjee said.
The revenue contribution of Mindtree’s travel vertical has inched up over the last few quarters, after nearly halving at the beginning of the pandemic to 8 percent of overall revenues. In the June quarter, it grew to 13.3 percent.
"Leisure travel has opened up, but we are watching it cautiously because the pandemic is far from over," Chatterjee said, adding that they should be in a good position to grow the vertical.
Mindtree has begun to call healthcare a separate industry line from the June quarter as it looks to build its portfolio in the sector that has seen one of the strongest demands since the pandemic.
However, revenues from healthcare stood only at $3 million in the quarter, and the company is looking to scale up investments. "It is early days for healthcare, and our clients are venturing into adjacencies of healthcare," he said.
Chatterjee said the company has made a lot of investment in building capabilities for healthcare. He called disruptions in healthcare such as customer success, cloud as the company’s sweet spot.
Hiring and second wave impact
The company saw record hiring for the second consecutive quarter as it added 14 percent to the net headcount.
Chatterjee said the second wave did not have any impact on clients as they leveraged what they learned from the first wave. "Given the strong demand, we will keep adding headcount," he added.