Mindtree will get back to growth path faster than others, says Chatterjee

As Mindtree announced its first annual earnings under L&T’s ownership, the mid-tier IT firm has taken a strategic call to bag more multi-year annuity deals. However, as the Covid-19 crisis hits the global economy, the IT firm is staring at a dip in revenue in some of its key verticals like travel and hospitality, and retail. Chief Executive and Managing Director Debashis Chatterjee tells Debasis Mohapatra that the company is looking out for new revenue streams to compensate for any possible loss this financial year. Edited excerpts:

Mindtree has bagged $1.2 billion worth of large deals in FY20. What was the nature of these deals and contribution of these contracts to revenues?

We won more deals in the past two quarters that were annuity in nature. Our strategy is to focus more on selected set of accounts (clients) and do more mining (for higher revenue). We had a very long tail (large number of small customers) when i joined. Now, we have rationalised the long tail and the number of active customers has come down. So, compared to past years, there are more number of deals, which are multi-year contracts.

Usually, analysts flag concerns regarding client concentration risk when revenue contributions from top clients are high. Do you see this as a concern?

To be very candid, we want healthy growth in top 20 clients in our portfolio and there has been a strategy to achieve that. As we do more annuity strategic deals, that will change over a period of time. But it will take a few quarters.

So, all issues relating to ownership transition are over and the management is only focused on growth now. Is that the message you want to convey?

Our focus is on profitable growth. We need to have growth, but not at the cost of margin. If you analyse the results of past two quarters, you can see that we have expanded our margins along with increase in profits. The transition that happened before I came, is history. The team has been very supportive.

Mindtree, like its peers, sees slowdown in demand in FY21. So, when do you see Mindtree achieving double-digit constant currency growth?

Covid-19 is something that is unprecedented. It’s not an isolated phenomenon, which is only affecting any particular economy of the world. After this crisis, a new normal will emerge. Clients will be more receptive to the idea that people can be productive by working from home. It is difficult to call out when we can get back (to double-digit growth path), but given our strength in digital technologies, we will get back to growth path faster than others.

In the earnings call, you said verticals like travel and hospitality, retail and manufacturing are likely to be affected owing to Covid-19? Will there be any new revenue stream that can compensate for these likely dip in revenue?

There is a team working on how to generate new revenue streams. In the travel and hospitality segment, we have some marquee clients. The best thing we can do at this point of time is to stay close to our clients. Many of these relationships are long-term. Yes, there are some ramp downs. But, by staying close to the client and offering them new solutions, we will be able to come back very strongly after things stabilise.

How is Mindtree placed as far as its cash reserves are concerned? Do you see Mindtree’s DSO (Days Sales Outstanding) increasing due to project ramp downs or delay in payments by clients?

DSO may increase a little bit but our overall DSO position is pretty good, which is around 66 days. Coming to cash position, it is healthy with a strong balance sheet. We don’t have any liabilities as such.

Mindtree has not announced any holding back of increments or salary hikes whereas many of its bigger peers have. Is there any specific reason behind this move?

I think every company has its own strategy in this respect. I don’t want to create anxiety (among employees). Also, let’s see how things unfold. There is a full financial year left to decide, whatever we want to decide. Meanwhile, we are working on various operational metrics and these don’t mean reducing employee numbers and saving cost. We are taking various cost optimisation measures. For example, our travel costs are down. So, there are multiple parameters (for cost optimisation).

Has the parent group (L&T) given any specific instruction on how to tide over this crisis?

I think, the group has always told me to run Mindtree the way I want to. At the same time, I can fall back on any kind of support I require. I take their guidance. We are in sync on all matters (relating to running Mindtree during this crisis) and there is nothing new to share.