Mindtree posts muted revenue growth in Q2, net profit down 34.6%

Deal pipeline remains strong, company expects to improve growth in H2

Mid-sized information technology (IT) services firm Mindtree on Wednesday posted 34.6 per cent decline in its net profit at Rs 135 crore for the second quarter of FY20 when compared with the corresponding period of the previous financial year. 

The decline in net profit was attributed to higher expenses arising out of payout to employees apart from absence of gains from currency movement, which it reported in Q2 of FY19. In sequential terms, however, net profit grew by 46 per cent.

The Bengaluru-based firm, which announced its earnings for the first time after L&T took majority control in the company, posted a profit before tax (PBT) of Rs 183.4 crore, a rise of 45 per cent in sequential terms. The company said it didn’t avail the new corporation tax rates as it is still operating in tax holiday zones.

In the September quarter, the company’s revenues at Rs 1,914.3 crore, grew 9.1 per cent on a year-on-year basis and 4.4 per cent sequentially. The dollar revenues in the quarter stood at $271 million. In constant currency terms, revenues rose 3.2 per cent sequentially and 11.1 per cent on YoY basis. 

“Our growth in the second quarter was fairly broad-based with contribution from all business verticals. We are confident to maintain our growth momentum in the rest of this fiscal year,” said Debashis Chatterjee, CEO at Mindtree.

In the July-September period, Mindtree signed deals with total contract value worth $307 million. “We have a strong pipeline of deals, which give us the confidence to improve our performance in the second half,” said Chatterjee. 

Contribution of Microsoft, Mindtree’s top client, grew 50 basis points to 20.6 per cent during this period. Operating margin improved by 300 basis points sequentially to 13 per cent in the September quarter, while it was 240 basis points down on a YoY basis. 

“With improvement in operational efficiency, we hope to improve our margin further in the second half of this fiscal,” said Pradip Menon, chief financial officer. 

The company, which has rebranded itself as an L&T Group Company, reported 11.4 per cent rise in its hi-tech and media vertical, while its travel and hospitality business grew 11.9 per cent on YoY basis. 

Growth in banking, financial services and insurance (BFSI) vertical also picked up with 6.3 per cent YoY rise. In the quarter under review, Mindtree’s employee attrition stood at 16.5 per cent, a rise of 140 basis points over the previous quarter. “Usually, Q1 and Q2 are the periods in which a lot of churn happens in workforce,” Chatterjee said. The IT services firm’s total headcount increased to 21,267, with a net addition of 332 employees in the second quarter.