‘Our order book has been impressive at $360 mn’

Bengaluru-based mid-cap information technology services firm Mindtree on Wednesday reported stellar results, helping its stock price rise over 200 per cent from its value a year ago. The results beat Street estimates. Positive commentary on the outlook also buoyed market sentiment. Managing Director and Chief Executive Officer DEBASHIS CHATTERJEE in conversation with Neha Alawadhi over Zoom a day after its second-quarter (Q2) results discussed the strategies that have worked and the road ahead. Edited excerpts: What do you attribute your strong Q2 performance to? What do you think has worked well for you in your strategy over the past year?

First and foremost, this is an excellent first half of the financial year, and lays a very strong foundation for industry-leading growth in 202122 (FY22). In the past four quarters, we've had consistent and robust growth. This growth has been broad-based across industries, service lines, and geographies.

Our order book has been impressive at $360 million, up 19 per cent year-on-year (YOY). Client proposition has been remarkable. We have also been focusing on significant growth beyond the top clients. We have been doing a lot of cross-selling and upselling that have yielded fine results.

We have laid out a robust yet simple strategy of 4x4x4 - four geographies, four industries, and four service lines. We have been saying we will focus on profitable growth and work with the partner ecosystem, in terms of specific areas.

That strategy is working out well, where we are able to crosssell, participate in transformation deals, and are able to ensure deals are not only just transformational, but multi-year as well.

The client contribution to revenue seems to have diversified, and contribution from top clients has been reducing. What is your way of looking at top client revenue versus others?

The philosophy is that if you look at the top client percentage as part of the overall revenue, it used to be at around 30 per cent. It has now come down to 24 per cent. It is our endeavour to bring it down further over a period of time. We don't want our top-line growth to slow down because a very strategic relationship is still there. At the same time, we will also focus in terms of growing the rest of the portfolio. The top client revenue growth YOY was 13 per cent, and not very high sequentially. If you look at sequential growth of the second to 20th clients, the portfolio grew 19 per cent.

How do you feel about attrition (17.7 per cent in Q2, from 13.7 per cent in the first quarter, or Q1) and the overall availability of talent? The overall talent scenario has been challenging. But challenges will be there in the business. We did anticipate that the attrition rate would go up somewhat. We will hire a significant number in FY22, compared to what we had in 2020-21. We also have programmes like Mindtree Edge with the Birla Institute of Technology and Science, Pilani to fund Mtech programmes for BSC and BCA graduates.

WE HAVE LAID OUT A ROBUST YET SIMPLE STRATEGY OF 4X4X4 - FOUR GEOGRAPHIES, FOUR INDUSTRIES, AND FOUR SERVICE LINES. WE HAVE BEEN SAYING WE WILL FOCUS ON PROFITABLE GROWTH AND WORK WITH THE PARTNER ECOSYSTEM, IN TERMS OF SPECIFIC AREAS

Does attrition have an impact on margins or impact your ability to fulfil projects?

When you have a lot of demand, you tend to hire more subcontractors, increasing the overall hiring cost. It is crucial to have different levers that control margins. That is exactly what we do as part of our overall operational efficiency and margin programmes.

What explains the sequential fall in order value to $360 million, from $504 million?

We have a lot of renewals that have happened in the previous quarter. We've seen there was a slight uptick in Q1. Also, $360 million is still 20 per cent YOY.

What are the demand trends you're seeing over the next few quarters?

The pipeline is quite robust. There is every reason to believe that by the time we close this financial year, our order book is going to be healthier than what it was last year. Growth has been broad-based across geographies. Europe is working out extremely well for us. We have hired a lot of leadership in Europe.