The midcap IT company Mindtree crossed a long-standing milestone of $1 billion in annual revenue for FY19, in a year when the company saw its largest shareholder VG Siddhartha and his Coffee Day Group sell their 20.3 percent stake in the company to Larsen & Toubro (L&T), triggering a move by the conglomerate to acquire 66 percent stake in the company.
The company ended
Q4 on a high, beating estimates on growth which was higher than larger peers such as Infosys, TCS and Wipro at 4.2 percent quarter-on-quarter and 18.3 percent for the full year.
Despite the strong performance, the company's press conference to announce the results was expectedly focused largely on the developments on the Mindtree management's stance with L&T, which the promoters had earlier accused of initiating a hostile takeover.
The focus was also on the special dividend that the board announced of 200 percent (Rs 20 per equity share of the face value of Rs 10 each) to mark the milestones of exceeding the $1 billion annual revenue figure as well as the 20th anniversary of the company.
Mindtree had declared special dividend on four separate occasions in the last 10 years in the range of Rs 1 to Rs 5 per share. The board had declared a special dividend on an occasion such as the 10th and 15th-year anniversaries, upon completion of 10 years of company’s initial public offering (IPO) and on the company crossing $100 million revenue.
Mindtree chief executive officer Rostow Ravanan did not want the media to read too much into the special dividend and the higher value at Rs 20 this time.
"The special dividend was only to celebrate our performance and the 20-year mark and there is no intention to hurt anyone or to motivate the price of the offer," he told reporters. "It is in line with governance and capital allocation policy," he added.
When asked if this was a strategy to challenge L&T's offer given it could not go through with the share buyback, Ravanan dismissed any connection between the two. "The buyback required us to go to shareholders through the ballot and get 75 percent approval. The dividend does not require such approvals but we will still wait for shareholder approval," he said.
Ravanan also did not elaborate on any change in the stance of the promoters towards L&T, especially given that in the previous press conference last month, the promoters had some choice words for the latter.
Management's tone seemed to become more reconciliatory over the past few weeks, as they were also pulled up by the board for referring to themselves as victims of a MeToo movement in the corporate world and likening L&T to a chainsaw coming to cut down the 'Tree'. CNBC had reported this last week.
Ravanan said there have been no touchpoints between L&T and the Mindtree management since the start of the saga. "We could have increased holding if we wanted to control Mindtree. We serve the board and if our performance meets customer expectations. We have no interest in controlling the company," Ravan retorted when asked yet again, for the nth time, why the promoters had not ringfenced their stake in the company.
Regardless of Mindtree's future as an independent company or not, the company did deliver a solid performance in a quarter where the top management was also caught up in the storm after the stake sale by VG Siddhartha on March 18.
The company's digital business grew at 32 percent and now accounts for over 50 percent of the company's revenues, prompting the management to break up the digital business into interactive, analytics and cloud going forward. The company said it was optimistic about demand environment, but said that it expects to see growth in the low teens for FY20 in constant currency terms.
Mindtree has been improving its operating margins, with EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margins growing to 15.2 percent, a jump of 160 bps. "We will improve EBITDA by 100-120 bps in next fiscal," Mindtree chief financial officer Pradip Menon said.
One basis point is a hundredth of a percentage point.
The company saw the key business segments grow well, with Hi-Tech and media growing 4.9 percent and banking, financial services and insurance (BFSI) growing about 5 percent. US business grew 4.5 percent and European grew 3.5 percent for the company.The board of directors have also declared an interim dividend of 30 percent (Rs 3 per equity share of par value Rs 10 each) and a final dividend of 40 percent (Rs 4 per equity share of the face value of Rs 10 each) for the financial year ended March 31, 2019.