Mindtree Q2 profit falls on higher expenses

Mid-sized IT firm Mindtree posted a profit of Rs 135 crore for the quarter ended September, down 35% from Rs 206.3 crore in the year-ago quarter, hurt by higher expenses on account of salary increases and headcount.

Revenue grew 9 % during the same period to Rs 1914 crore. On dollar basis, profit stood at $19.2 million on a revenue of $271.0 million.

Mindtree, on a press call said, it expects continued margin improvement in the second half of the financial year as the company which was recently acquired by Larsen & Toubro focuses solely on profitable growth, going forward.

“We expect improved margins quarter-on-quarter in the second half. Suffice to say we are seeing enough action on ramp-up of deals and improved employee utilisation,” said Mindtree CEO Debashis Chatterjee, who took over the position in July after L&T acquired control of the company. “Fourth quarter margins will be better than third quarter, which will be better than second quarter.”

The company posted a margin of 13% in the second quarter, up from 10% in the first quarter.

Mindtree CFO Pradip Menon said on an analyst call that it isn’t realistic to expect that the company will exit FY20 with better margins than FY19.

The employee count stood at 21267 people, up 332 from the previous quarter. Employee attrition saw a spike to 16.5%, up from 15.1% in the previous quarter. However, the company said it not worried about attrition and the spike is due to an expected churn in the first half.

The company, which primarily provides IT services to retail, consumer packaged goods manufacturing, banking, media, travel and hospitality industries, had 343 active clients. It clarified that it expects no issues with top clients due to change in ownership or management at Mindtree. L&T's takeover of Mindtree marked India's first-ever hostile takeover in the IT space.

The total contract value fell to $307 million in the second quarter from $324 million in the first quarter.

In July, L&T had acquired control of Mindtree and was categorised as a promoter with 60.06% stake in the company. Mindtree’s four founders -- Subroto Bagchi, NS Parthasarathy, Natarajan and Rostow Ravanan -- who together hold around 13.32% in Mindtree and served as directors on the company’s board for two decades, quit after L&T managed to conclude its open offer.