Mindtree Q2 margins improve; dollar revenue grows 3.1% sequentially

Key Highlights

• Total deal wins for the quarter stood at $303 million.
• Top client revenue shrinks by 1.2 % in the September quarter.

Bengaluru-based mid-tier IT firm Mindtree posted revenues of $261 million for the second quarter ending September 30 2020, registering a growth of 3.1 per cent on a quarter-on-quarter. The company's operating margins saw further improvement at 19.6 per cent, an expansion of 140 basis points over the previous quarter. However, the company closed fewer deals compared to the last quarter ($391 million) with the total contract value of $303 million signed during the September quarter, adding eight new clients.

Debashis Chatterjee, Chief Executive Officer and Managing Director said when looked at from a half year perspective, in H1 FY21, "The company saw $694 million in total contract value (TCV) across industry segment, which represents 10% year-on-year growth".  Though the company did not break up the renewals to new deal wins in the TCV, Debasis said the renewals, however, were not like-to-like. "Most renewals have come with significant change, with additional work that clients have like us to do, so I wouldn't put that as renewals," he said. The net new customers added have been in the areas of cloud, omni-channel experience, tech modernisation and have come in as project as well as annuity deals, he further said. The 1.4 per cent margin expansion was seen on account operational efficiencies, better utilisation without additional headcount and forex gain and treasury management with a better return on investments.

The top client of Mindtree whose revenues touched nearly a third of its total revenues, saw a contraction of 1.2 per cent. "We are trying to nurture the strategic accounts and adding new clients and that is the philosophy," said Debashish. The company will also begin its salary increments effective January 2021. While the company says it sees green shoots amidst uncertainty in travel, transport and hospitality sector, "we continue to see good growth momentum in other sectors as well. Looking at demand traction, the resonance of service offering and ramp-up of the deals won, we anticipate growth momentum for the next quarter despite it being a seasonally weak quarter," he added.

There have also been a few changes in the board composition with Jayant Damodar Patil resigning with effect from 15 October, while the current Chief Operating Officer - Dayapatra Nevatia, and Venugopal Lambu, President - Global Markets, both have been elevated as Executive Directors.

Mindtree has also declared an interim dividend of Rs 7.5 per share.

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