While the business outlook for domestic IT firms doesn't look bullish, Bengaluru-based midsize IT firm, Mindtree is sanguine about its growth prospects in this financial year. While its deal pipeline looks robust, its recent acquisitions are also slowly stabilising. Against this backdrop, Mindtree CEO and Managing Director, Rostow Ravanan talks about the broader strategy of the company going ahead, in a conversation with Debasis Mohapatra.
Mindtree is upbeat about business prospects in FY19. What makes you so positive about growth when all domestic IT firms are struggling to cope with a challenging operating environment?
I have no clue what rest of the companies are facing currently. My confidence is coming from the efforts we have put in for last 2-3 years, such as understanding the change in the market, understanding the requirements of our clients, training our people and (understanding) the disruptions that are happening in the industry, among others. If you see our growth for last few quarters, it's among the best in the industry. We are growing faster than the industry. We have also seen continuous growth in our (deal) pipeline. Our win ratios have also been increasing. That's what is giving us confidence.
How do you see your revenue growth in the current financial year?
As a policy, we don't give guidance. But, our feeling is that we will grow significantly higher than last fiscal. So, last fiscal, we have grown approximately nine per cent and we hope, it will be much higher than last fiscal.
Your margins have improved in Q4 of FY18 but you have given a guidance that margins would be hit by 300 basis points due to compensation cost. Where do you see your margins this fiscal?
At an operating profit level, we have shown a 5-percentage-point improvement in margins last fiscal. This is despite rupee appreciation seen during most parts of last fiscal. The confidence of margin improvement is coming from the measures we are taking up. For example, our utilisation levels are increasing. More work is coming back to offshore in digital space.
Operationally, the two businesses we acquired- Bluefin and Magnet- are also becoming more stable and more positive. We should be able to get back to higher margins in FY19 than FY18 and go back to the trend of previous 4-5 years. But, this is assuming that the average exchange rate should remain at last year's level. During last two months, rupee has been weaker. And if that continues, then our margins will be higher.
Have operations from your acquired entities- Bluefin and Magnet- stabilised?
Operations have stabilised. I think revenue will go through one or two quarters, where we can say that it is in comfort zone. Nonetheless, we recognise that revenue from a high consulting business will be lumpy.
Given your experience with the recent acquisition, will you look at any opportunity in the near future?
Our past acquisitions don't reduce our appetite for future acquisitions. If anything comes, we will evaluate on the basis of merit.
Digital revenue contributes around 40 per cent of the overall revenue. Do you see this space keeping up momentum this fiscal?
We are very transparent about how we define as digital. In the digital space, we have done a lot of groundwork -- whether it is acquisition, whether it is skilling, whether it is hiring people, building domain knowledge. Today, we are reaping the benefits. That's why our digital is growing faster than Mindtree (overall). While Mindtree grew around 9 per cent, the digital business grew around 18 per cent.
You have carved out a separate business unit for Indian operations but seem to be not so bullish on domestic business opportunities. What is the reason behind such an approach?
Historically, we are focussed on few things but want to do them well. For example, we don't have a hardware business, we don't have a BPO business. So, historically, we found that our kind of offering was not appreciated in the Indian business context. Many people want one vendor who supplies both software and hardware. But, we are in India since the beginning, serving Indian businesses, though in a quieter and focussed way. Now, we are recognising that things are changing; now the government is pushing the digital space. So, we are changing our strategy, recognising these changed market conditions.
Mindtree has deployed a lot of Bots in operations. Has that impacted job creation at the organisation? Are bots replacing humans?
It's not a Bot-versus-human issue. What we are seeing that whether we like or not, automation has become the trend of the day. We need to do it for our own survival and our customers need to do it for their own survival. From our point of our view, where ever we have deployed Bots, it has not led to job loss. It has led to a lot higher efficiency levels. There is cost savings and significant improvement in people satisfaction due to these deployments.
What is your hiring outlook for this year?
This year, we are committed to add 1,900-2,000 graduates from campuses. Offers have already been made from October to March last year. Typically, they will join in four batches- around 400-500 people in each batch. Lateral hiring will be over and above this. Our attrition levels are one of the lowest in the industry.