Mindtree looks to capitalise on medium-term demand

Mid-sized IT firm Mindtree reported consolidated profit of $54 million in the second quarter of fiscal year (FY) 2022, growing 16 percent sequentially and 57 percent over the corresponding period last year.

Mindtree, a Larsen & Toubro subsidiary, clocked revenue of $350.1 million in the quarter ended September 2021, growing 12.7 percent sequentially and 34 percent higher than a year ago.

“The broad-based momentum and growth outlook across all verticals, service lines and geographies attest to our operational rigour and sharp focus on being a trusted business transformation partner to our clients,” said Debashis Chatterjee, CEO and Managing Director of Mindtree.

Its retail, consumer products and manufacturing (RCM) sector grew by nearly 30 percent sequentially, and by 60.8 percent over the same quarter a year ago. The RCM contribution to revenue has increased by 4.2 percentage points over 12 months, and accounted for nearly $89 million of the revenue in the quarter ended September 2021.

Mindtree's sequential growth in the healthcare sector was 23.6 percent, though the segment contributes just over 1 percent of revenue.

Another bright spot in Mindtree's revenue mix was the recovery in the communications, media and technology (CMT) segment, which contributes over 40 percent of Mindtree's revenue. It grew 23 percent over a year ago, and by 5.4 percent over the quarter ended June 2021.

What will worry Mindtree's management is the decline in North America's contribution to revenue. Its largest market (by geography) contributed 72.8 percent of revenue in the second quarter of FY 2022, lower than the 77.4 percent a year before. Its North America revenue grew 7.1 percent sequentially.

The Continental Europe contribution to revenue has improved from 7.5 percent to 8.7 percent in the past twelve months, as has 'UK and Ireland' from 7.9 percent to 10.9 percent in the same period.

In the earnings call with equity analysts, Chatterjee said the demand environment in the short to medium term looks positive, which Mindtree will capitalise on. Clients are making technology central to their strategy, he added.

Mindtree signed a few multi-year deals in the second quarter of FY 2022, which included helping an airline company to accelerate time-to-market, and reduce the total cost of ownership through automation.

It has a total of 263 active clients, and 29,732 employees as of September 30, 2021. However, its attrition rate of 17.7 percent was higher than the 13.7 percent Mindtree reported in the first quarter of FY 2022.

In the quarter ended September 2021, Mindtree also integrated the business earlier known as L&T NxT from its parent company. Mindtree's board had approved the business transfer in May 2021. Mindtree NxT will enhance its cloud-based IoT and AI capabilities for Industry 4.0, the company said in a stock-exchange filing.