Larsen & Toubro-owned mid-tier tech firm Mindtree is actively looking at suitable, but selective M&A targets that will help the company further its digital vision for its global clients, said CEO & MD Debashis Chatterjee. Excerpts:
What gives Mindtree confidence to anticipate double-digit revenue growth throughout FY22?
The context is that an unprecedented disruption caused by the pandemic has created a sense of urgency among businesses to leverage technology to stay relevant. We believe we have a differentiated strategy, capabilities, portfolio, and partnerships to help our clients reimagine their business models and become future-ready. Strategic initiatives that we undertook through last year – investments in strengthening leadership, client relationships, service offerings, and operational efficiencies – are yielding good results. All these are positioning us well to deliver industry-leading double-digit growth this year.
We just delivered our fourth consecutive quarter (Q1) of solid growth despite difficult times. We reported broad-based growth across service lines, industry segments and geographies. Our order book of half-a-billion U.S. dollars, up 34.2% sequentially, is the highest ever in our history.
What would be the impact of fiscal stimulus in the U.S. and EU on IT spends?
As businesses look to strengthen their digital backbone and reimagine business models leveraging technology, the demand for our capabilities has risen significantly across both North America and Europe.
With the U.S. economy gradually returning to normalcy and Europe opening up to strategic technology partnerships, we are winning important deals across all key verticals. We expect any fiscal stimulus to catalyse greater stability, better consumer sentiment and higher business spends in both efficiency and modernisation initiatives.
Are you expecting any additional headwinds in the travel, transport and hospitality sectors?
Having borne the brunt of the pandemic, travel, transport and hospitality (TTH) sectors are beginning to show early signs of recovery. Volumes are picking up. Vaccinations and easing of travel restrictions are expected to give a further boost to the sector. Client focus is shifting from cash conservation to discretionary spend with a direct bearing on customer experience, outreach, revenue growth, business resilience and security. For example, a global travel software and technology company selected us as a strategic partner to modernise their entire passenger reservation platform and accelerate their cloud transformation journey. A global travel management firm engaged us for a multi-year, end-to-end AWS cloud migration programme to drive its new business and product strategy.We remain cautiously optimistic about the sector as it is hard to predict the impact of future variants of the virus.
What is the outcome of Mindtree’s increased focus on Europe and reduced concentration in North America?
While capitalising on the recovery in North America, we have doubled down on investments in Europe to strengthen our leadership and delivery capabilities there. Our investments in Continental Europe, U.K. and Ireland have helped us deliver strong growth of 11.2% q-o-q and 52% y-o-y for the region in Q1. In dollar terms, North America grew 7.7% sequentially and 18.9% y-o-y. For FY22, we expect Europe to grow faster than the U.S., albeit on a smaller base.
Size often plays a critical factor in the global markets... what’s your game plan to quickly gain scale and increase market dominance?
We think of size as more of an outcome than a strategy. Our focus will continue to be on bringing our clients the competitive benefits of our agile frameworks and approaches in their digital transformation journeys. Our strategy is built around the guiding principles of ‘simplify’, ‘differentiate’ and ‘change’, which are our strategic levers in our role as a business transformation partner to our clients. We continue to focus on enhancing our domain expertise in chosen areas such as healthcare, cybersecurity and deep domain technologies. We are also strengthening our consulting and technology capabilities across our service lines, and deepening and expanding strategic relationships with clients, partners and hyperscalers. Focused M&As are key to our growth strategy.
Backed by L&T, Mindtree now can afford a big-ticket acquisition... when will that happen?
M&As will be more about complementing or augmenting our capabilities in strategic focus areas, as evident in our recent acquisition of L&T NxT, which has opened new opportunities for us around AI, IoT and Industry 4.0. We are actively looking at companies that will help us further our digital vision for our clients.
But we will be selective in the type of companies we go after.
How will Mindtree tune its pricing strategy (through price increase) to offset downward pressures in the market?
We have successfully sustained our revenue momentum through the year and used multiple efficiency levers to deliver profitable growth. We expect the benefits to outlast the pandemic and offset future pressures.
