Mindtree leaps 9% on better-than-expected Q4 earnings amid Covid-19 woes

The company reported Ebitda margin expansion of 250 basis points QoQ, and record deal wins of $393 million during the quarter despite the Covid-19 disruption

Shares of Mindtree rallied 9 per cent to Rs 855 on the BSE on Monday in early morning deals after the company posted 4.3 per cent quarter on quarter (QoQ) revenue growth at Rs 2,050 crore for the quarter ended March 2020 (Q4FY20). Besides, it posted a net profit of Rs 206.2 crore, a rise of 4.7 per cent sequentially.

The mid-tier IT firm reported revenues at $278.4 million, a 1.9 per cent rise in constant currency term over the previous quarter. Operating margin, meanwhile, improved 150 basis points sequentially to 17.1 per cent in Q4FY20. The company reported earnings before interest, taxes, depreciation, and amortization (Ebitda) margin expansion of 250 basis points QoQ, and record deal wins of $393 million during the quarter despite the Covid-19 disruption.

Looking ahead to fiscal 2021, the management anticipates softness in demand due to the unprecedented virus pandemic. However, analysts at Motilal Oswal Securities found the commentary stronger than that of some large-cap companies.

“Management sounded more confident relative to Tier I, on the deal pipeline, deal ramp-ups, and the scope for margin expansion (in FY21). While the high concentration to Microsoft (25 per cent of revenue) is a key thing to watch out for, it is likely to drive robust growth over medium term. This may be attributed to an expected surge in demand for some of Microsoft’s offerings in post-Covid-19 era and MTCL’s diversified presence across various spending areas in this account,” the brokerage firm said in results update.

Higher-than-expected deal wins, exit margins, and confidence about timely deal ramp-ups indicate the Covid-19 disruption in FY21 may not be as bad as initially feared. In fact, Mindtree is likely to benefit from the widespread adoption of digital/collaborative tools in response to the pandemic, it added.

Meanwhile, the board has recommended a final dividend of 100 per cent (Rs 10 per equity share of par value Rs 10 each) for the financial year ended March 31, 2020.

At 09:32 am, the stock was trading 7 per cent higher at Rs 836 on the BSE, as against a 2 per cent rise in the S&P BSE Sensex. The stock saw huge trading volumes with a combined around 1 million shares changing hands on the counter in the first 15 minutes of the trade on the NSE and BSE.