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Mid-tier IT services firm Mindtree, which reported strong revenue and margin numbers late on Wednesday, remains bullish about market opportunities despite the macro-economic headwinds faced by the global economy. Debashis Chatterjee, CEO and MD of Mindtree, spoke about attrition, margins and the impending integration of group company L&T Infotech. Edited excerpts:
How is the demand outlook amidst the global macro-economic headwinds?
This quarter, too, we delivered on our vision of profitable growth. This is the sixth (consecutive) quarter of 5-plus per cent growth in constant currency terms (on revenue). EBITDA also came in strong. More than the macro-economy it is the portfolio of clients, the market segments we operate (in). We are closely aligned with our clients’ outlook and behaviour. Everybody is observing and are cautiously optimistic in terms of what comes up, and nobody has raised a red flag saying they want to change plans.
Barring a couple of instances which are specific to RCM (retail, consumer goods and manufacturing), overall the other markets — banking, financial services and insurance (BFSI); technology, media and services (TMS); and even travel and hospitality, which was the most hit during the pandemic — are doing well. Client sentiment is roboust, demand continues to be strong.
Having said that, there are account- and client-specific ramp-downs. One of the ramp-downs we had called out last quarter itself, as they had done a lot of work during the pandemic. That ramp-down was expected. The decline you see is also due to cross-currency movements. One client got impacted because they had a huge market in Ukraine and Russia, plus supply chain situation in China due to extended lockdown. But those are specific, isolated instances of a couple of clients. Overall pipeline is good, demand environment is good. We will be observing closely if anything changes. For now, our profitable growth story is here to stay.
On ability to hold margins, which have expanded because of favourable currency movement?
When I came in three years back, we were around 10 per cent and I clearly indicated that we could do 20 per cent, which we have done. Quarter to quarter there might be (small) variations, but at fiscal (year) level we are confident of holding it. Our margin success and profitable growth have been indicative of how effectively we used those levers through disciplined execution.
How is the integration with L&T Infotech progressing?
When we announced on May 6, we said that these kinds of integrations typically take 6-9 months. Our hope is to conclude everything within this fiscal and operate as a single entity. We have received NOC (no-objection certificate) from the stock exchanges in mid-June. We are awaiting regulatory approvals and there is a steering committee set up, which is focussing on ensuring progress. We are on track.
On hiring and attrition?
Our headcount crossed 37,000 this quarter with a net addition of 2,200 people. Attrition is at 24.5 per cent on a LTM (last twelve months) basis — slightly elevated compared to the previous quarter, but we have always said this attrition is not sustainable and is likely to stabilise in the next few quarters. We are seeing early signs of stabilisation aided by layoffs reported in the start-up sector and other factors. We have a robust programme for fresher intake — at least 1,500 freshers per quarter is what we are targeting.
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