On July 13, Mindtree announced its consolidated financial results for FY-23 Q1. 

The company reported its highest-ever order book at $570 million, growing by 13.1 per cent YoY. Additionally, it achieved an all-time high cash and investment balance of $500 million. 

Mindtree recorded a 5 per cent growth in constant currency for the sixth consecutive quarter, with current quarter revenue touching $399.3 million. In US terms, it has recorded 4 per cent growth. EBITDA for the current quarter displayed a healthy statistic of 21.1 per cent. However, its net profit observed a decline of 3.8 per cent QoQ ($60.3 million)—a growth of 29.7 per cent YoY. 

In FY-23 Q1, the company onboarded 4,700 employees leading its total headcount to 37,455 professionals. 

At the earnings call, Mindtree’s Chief Executive Debashis Chatterjee revealed that the pandemic and its aftermath reinforced the long-term potential of digital transformation. Organisations across sectors have first-hand experience of its value, separating the winners from the rest. 

“It is clear by now that digital transformation is an ongoing business imperative. It is neither a one-off project nor a short-term mixing”, emphasises Debashis Chatterjee.  

In this context, Chatterjee believes that a renewed focus on digital transformation has provided an edge to Mindtree’s ability to service its clients through all digital transformational journeys and utilise reimagined processes for better efficiency and efficacy. Concomitantly, there are attempts to redefine business models to maximise growth and market shifts along with harnessing digital technologies to be relevant and future-ready. 

“This positions us as the partner of choice to clients pursuing digital transformation to improve revenue streams, as well as realise cost efficiencies. This dual objective underpins every transformation initiative but tends to be more immediate and pronounced during macro-economic shifts.”

—Debashis Chatterjee, Chief Executive–Mindtree

LTI-Mindtree consolidation 

In May 2022, the board of Larsen and Toubro Infotech (LTI)  and Mindtree accorded their final approval to the merger of the two independently listed companies. At the earnings call, Mindtree disclosed that it was going through a regulatory approval process and would require approximately six to nine months from the day of announcements to be equipped for the merger. 

If this merger continues, the combined entity LTI-Mindtree will become the sixth-largest IT services firm in India by revenue, with over 80,000 employees and combined revenue of $3.5 billion. 

The company also revealed that it would retain the original name, ‘Mindtree’, following the merger. Mindtree Chief, Debashis Chatterjee, is expected to be in charge of the enterprise. Following the announcement of the merger, LTI also confirmed that their Chief Executive Officer and Managing Director, Sanjay Jalona, had resigned due to personal reasons. 

LTI FY-23 Q1 results 

Recently, LTI announced its financial results for FY-23 Q1, reporting 27.7 per cent YoY in net profit at INR 634.4 crore and revenue at INR 4,522.8 crore. In the context of deals, the company successfully added four new Global Fortune 500 companies to its list of clients in the first quarter of 2023, taking the total count to 77. 

“We are also happy to announce four large deal wins during the quarter with net new TCV of $79 million.”

—Sudhir Chaturvedi, LTI board member 

On the other hand, Mindtree—as of June 30, 2022—boasts nearly 274 active clients. This quarter, they successfully added three new clients, with a deal size of $10 million+ (total: 35 clients) alongside four new clients, with a deal size of $20 million+ (total: 18 clients). However, a slight decline in the number of active clients was noted compared to the previous quarter, FY-22 Q4, when Mindtree recorded nearly 276 active clients. 

“There have been some challenges in terms of getting more additions, but we endeavour to add more and more because, overall, the pipeline still looks fairly robust”, says Debashis Chatterjee in response to the decline. He further claims that Mindtree remains confident about its overall H1—the first half of the fiscal year. 

Customer experience 

With this merger, the duo is expected to explore synergies and create a stronger portfolio of offerings, enhanced delivery capabilities and robust large deals funnel. 

VC S N Subrahmanyan, CEO and MD of Larsen & Toubro Limited, says that the company has developed strategic plans up to 2026 to achieve targets and explore strategies to obtain better deals for both companies in the future. 

Subrahmanyan further reveals that Mindtree clients are optimistic, some offering more deals in addition to their previous contributions. For instance, clients previously providing a $25 million deal are now confident in providing business worth $100 million. 

But what about LTI customers? 

Debashis Chatterjee explains that the feedback about the merger has been positive so far, with a few clients querying about the new structure of operations and the overall strategy of the merged enterprise. 

“Wherever there was any question raised, me and my leadership team straightway got into call with the client”, remarks Chatterjee, emphasising that, at a broader level, Mindtree’s clients are fairly at ease with the overall vision they have laid out for the merger. 

Employee transition 

Mindtree has an aggressive hiring trend for freshers (i.e., nearly 7500 freshers) and plans to continue recruitment for the time being. However, there is a high possibility that some changes may be introduced considering the merger to ensure smooth employee transition. 

Mindtree revealed that upon the confirmation of the merger progress, there are multiple steps and milestones that it hopes to achieve—chiefly, to obtain the requisite clearances to approach the regulators as an entity. The company has also confirmed the progress of the clearance process.

The initial phase of the merger is expected to be critical and challenging for both LTI and Mindtree. Even the most trivial operational change could have a significantly negative impact on both employees and customers. According to  Gartner, companies are bound to compete primarily on customer experience (CX). Therefore, a meticulous blend of expert individuals and operational processes is required to ensure seamless progress.

Global deals 

At the earnings call, Mindtree revealed that the contributions from North America were at 76.8 per cent. In contrast, continental Europe, the UK and Ireland contributed 14.6 per cent combined, while the Middle East and APAC added about 8.6 per cent to their FY-23 Q1 revenue. 

A deal of note for Mindtree was partnering with a leading US-based airline as their designated digital product development partner. As part of the multi-year deal, Mindtree will assist the airline in accelerating growth by transforming its core systems and digital channels. 

In yet another notable deal, a healthcare technology provider accorded a three-year digital transformation contract to Mindtree for business-critical application development and maintenance services. 

A leading hyperscaler likewise chose Mindtree for a multi-year managed services deal. Mindtree will provide technology and programme management support to the company’s digital stores globally. 

For a global professional services firm, Mindtree is building a data management platform for a multi-year transformation journey. 

In another significant deal, Mindtree is using blockchain technology to create a smart digital contract for its pharmaceutical client that keeps track of its supply chain, from raw materials to distribution.

Mindtree’s clientele is indeed diverse and stretches across territories. 

“With technology increasingly at the centre of enterprise transformation and value maximisation, we continue to consolidate our leadership position and deliver superior outcomes and differentiated experiences by using emerging technology”, says Debashis Chatterjee while discussing Mindtree’s growing roster of clients that they assist in transforming at scale and optimising their technology footprint. 

Rising attrition rates

Mindtree’s attrition rate increased at 24.5 per cent in FY-23 Q1 compared to the 13.7 per cent rise in FY-22 Q1. At the earnings call, it was disclosed that several quarters would be required for the situation to stabilise.

A strong quarter 

Mindtree and LTI have had a strong quarter with 5 per cent and 1.7 per cent revenue growth QoQ, respectively. With their merger at the regulatory approval stage—which is expected to take approximately six to nine months to process—both companies are looking forward to their much-anticipated collaboration. 

However, the macroeconomic conditions, including the rising interest rates, fear of recession, supply chain crunch due to the Russia-Ukraine war and other concerns, the near future seems uncertain. 

“At the end of the day, it also depends on the portfolio of clients you have. . . We try to understand whether their plans are also changing, and based on their plans changing, our plans also can change.”

—Debashis Chatterjee, Chief Executive–Mindtree

However, Chatterjee explains that there aren’t any significant changes in the plan as of now while also recognising that there are a couple of industries where they have seen some delays and some deals getting pushed out. 

“So, those things we are watching very closely”, says the Mindtree executive while maintaining that they are cautiously optimistic about the changing dynamics.