Deals ensure revenue visibility for MindTree

K. Venkatasubramanian | Updated on February 23, 2011


The recent deal wins by MindTree would give the company significant revenue visibility.

It has won two deals, totalling to about $70 million in value. Being spread evenly over a period of five years, the annual value of $14 million would be about 5 per cent of MindTree's total revenues.

These deals hold several positives for the company. One of the deals comes from an information communication technology service provider in Europe, which suggests that the telecom vertical is starting to walk the path of revival. The other deal from a US-based bank indicates continuing strength in the US geography and the BFSI vertical.

MindTree has indicated that the margins from these deals would be on a par or slightly better than the average rate the company garners.

The company enjoys operating margin of around 11.9 per cent.

MindTree had gotten reasonable pricing improvements in new contracts in the December quarter and it appears that the momentum continues to be in that direction.

The present deals involve delivering application and infrastructure support services as well as telecom support and remote desktop management. Infrastructure services are to be delivered from its proprietary platform. With over 88 per cent of its staff based in India and much of these services to be delivered from offshore locations, MindTree will be able to optimise costs.

This deal also reduces fears about large deals going only to top-tier players and indicates that clients may be willing to enlist mid-sized vendors as well.

Though the stock reacted positively to the news and rallied to Rs 448 levels intra-day, it closed down marginally at Rs 402.4.

Published on February 23, 2011

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