Resilient Business Growth

The third-quarter results of Mindtree for 2020-21, proved to be a stellar performance, thanks to its broad-based revenue growth of 5.1 per cent at Rs 2,024 crore across verticals and service lines. Its Banking, Financial Services and Insurance (BFSI) segment rose 0.8 per cent, Communications, Media and Technology (CMT) grew 5 per cent, Retail, Consumer Packaged Goods and Manufacturing (RCM) grew 5.8 per cent and Travel, Transport, and Hospitality (TTH) saw a 13 per cent growth. The management feels these verticals are expected to witness strong growth backed by a robust deal pipeline in the coming quarters. Also foresees a positive outlook for the second half of the financial year 2021 despite some seasonal weakness.

Strong execution, higher utilisation and decreased travel cost have led to operating profit growth of 52.8 per cent Year-on-Year (Y-o-Y) at Rs 468 crore. The net profit for the third quarter reported a growth of 65.7 per cent Y-o-Y. “With depreciation in rupee, lower travel cost and low on-site expenses, Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) margins are likely to expand in the near term,” points out an analyst with Axis Securities, tracking the company. For the third quarter, Mindtree’s order book stood at $312 million, representing a 51 per cent Y-o-Y growth. “With a healthy deal pipeline, the recovery in the travel vertical will support growth. We have factored in dollar-revenue growth of -1.7, +12.9, +10.7 per cent, and an EBITDA per cent of 20.6, 20.8, and 20.7 for the financial years 2021-22 and 23 estimates respectively,” says an analyst with HDFC Securities.

Apart from a healthy order book, Mindtree is also witnessing traction in cloud, data, and customer success. During the third quarter, it added eight new clients, while the active clients stand at 276 as of December 2020. The company has been selected by a US-based diverse insurance and reinsurance provider to offer end-to-end IT and cloud services. This would lead to enhanced efficiency and speed of business standardisation.

The management expects a further growth. “The company is trying to grow other accounts and we see top clients’ share coming off gradually with Microsoft, which will be a structural positive,” says an analyst with Nirmal Bang Institutional Equities.

Mindtree’s scrip saw a 66 per cent rise on February 19, 2021 against last year, compared to the BSE Information Technology index, which saw a 62 per cent rise.

This bodes well for long-term investors. Some of the prominent brokerages remain positive on the growth aspects. “The company’s focus on annuity type deals, expansion in healthcare vertical and Europe bodes well for future revenue growth,” says an analyst with HDFC Securities.