Mindtree Q2 net profit up 78%; company reports 5.8% volume growth

Mindtree on Wednesday posted a 77.8 per cent year-on-year increase in its net profit for July-September 2013 at Rs. 128.7 crore

Mid-sized information technology (IT) services firm, Mindtree on Wednesday posted a 77.8 per cent year-on-year increase in its net profit for July-September quarter of FY2014 at Rs. 128.7 crore, while the company's revenues went up by 29.1 per cent to Rs. 769.6 crore, backed by strong growth in key sectors and business lines.

 

On a quarter-on-quarter basis, the Bangalore-based company's revenue increased 18.8 per cent, while its net profit declined by 4.9 per cent, due to lower foreign exchange gains. In the quarter under review, Mindtree booked foreign exchange gains of Rs. 20 crore amid extreme volatility in the Rupee, as compared to forex gain of Rs. 61.8 crore in the previous quarter. The Indian currency depreciated around 11 per cent against the dollar during July-September. Every one per cent movement in currency has a 35-40 basis points impact on the company's margins.

 

Earnings for July-September were supported by a robust 5.8 per cent sequential growth in business volume (growth in billed man-hour in a quarter) . The company added nine new clients during the quarter, and took the number of its clients which contribute over $5 million in annual revenues to 21 from 20 in the previous quarter.

 

“The relentless execution of our new strategies has delivered two consecutive quarters of strong revenue growth this year,” Krishnakumar Natrajan CEO and managing director said. “We continue to invest in expertise-led solutions and attracting top quality industry talent. This drives positive business outcomes for our customers while achieving sustainable growth,” he added.

 

While the company saw growth across all its verticals, manufacturing, consumer packaged goods and retail vertical grew 8.9 per cent sequentially. Travel and transportation vertical grew by 7.8 per cent.

 

Effective April 1, 2013, Mindtree had revamped its organisational and management structure. The company had identified manufacturing, banking, financial services and insurance (BFSI), hi-technology, and travel and transportation as its reportable business segments. 

 

On the service line front, Mindtree saw a robust 20.5 per cent sequential growth in infrastructure management and tech support.

 

The company's operating profit margin expanded 240 basis points sequentially to 20.8 per cent in the quarter, mainly supported by the favourable foreign exchange movement.

 

Mindtree added 1,122 employees during the reporting quarter on a gross basis, the highest in seven quarters. Attrition on a trailing 12-months basis declined to 11.9 per cent from 12.4 per cent a quarter ago.

 

While Natarajan said that the company is witnessing an improved demand environment as against a year ago, he added that earnings for October-December, 2013, may be weaker due to seasonal factors such as lesser working days and furloughs.

 

“Q3 is a seasonally weak quarter for the sector and our growth rate will be slower during the period,” Natarajan said. “Certain sectors will be hit by furloughs and golden weeks due to shutdowns,” he added. Margins for Q3 may also see a “small negative impact” due to seasonality.

 

Natarajan also reiterated that Mindtree is confident of posting a higher growth in FY14 as against a year ago.