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Q2 to be better than Q1 and FY19 margins will be higher than in FY18: Rostow Ravanan, Mindtree


We need to improve margin and diversify client base but we still have an enormous amount of headroom to grow with our top client, Rostow Ravanan, CEO & MD, Mindtree, tells ET Now.

Edited excerpts:

How do you expect to grow this year?

We are extremely confident of our growth for this year and even the medium term future because all the investment that we have made are resonating extremely well with our clients. They are trusting us with transformational, very large, very complex programmes across both their grow and run technology initiatives.

The second reason why we are very confident is because of the increasing ability of Mindtree to attract and retain world class talent globally. If I take care of my customers and of our people, I have 100% confidence that we have a great future in front of us.

While Q2 will be a little soft as far as the growth is concerned, in terms of margins Q1 took a hit because of the wage hike. It has been a well-rounded growth but we have not seen that really transpire into good margins for the company?

This quarter, we had a 30 bps improvement because of efficiencies. It was a small improvement in profitability on an operational basis. I am excluding any currency impact. So, in spite of the headwinds of salary increase and the commitments we have made to some of the research institutes, we still had a profit improvement in this quarter. Q2 is likely to be better than Q1. Our commitment is that full year FY19 will have higher margins than FY18.

Analysts worry that most of the revenue comes from top two or top three clients. Is the mix slowly changing because growth has come from a massive spike from top clients that the company is engaging with?

Just like we are conscious of the need to improve margins, we are conscious of the need to diversify our client base. But there is another aspect to it. Our largest client is a very big technology company. They have a billion plus dollar worth work that they outsource to third parties globally. We still have an enormous amount of headroom to grow. Add to that, the customer satisfaction scores that we receive from this customer are among the best.

We will do everything to keep this customer happy and grow as fast as we can here but we will also do everything we can to diversify the portfolio as well. In this quarter, optically there was one issue; some of our clients are Europe-based and cross currency income had 2-3% impact. But even if you exclude the cross currency impact, on a reported basis our 2 to 20 bucket grew by about 5.2% in this quarter. So, we are conscious and we are making a lot of effort and results are showing.

You had clarified about media reports that the promoters are looking to exit the company. How would you really respond to speculations like this because you were in the silent period while the reports broke out. Does the promoter group back the company because it also sends a message to shareholders on stability going ahead?

100% sure. There are no doubts in our minds on that front. All of us at the founder team as well as the extended leadership team are thoroughly enjoying building Mindtree into a memorable company. The news report that was published was wholly false. There was no truth in that story. When that story broke we were in a silent period and so based on the advice from our legal counsel, we could not respond to that story.

We are now engaging with media and clarifying that there was no truth whatsoever to that story. There is also a continuing speculation about our largest investor Coffee Day Group planning to divest their stake as well. We took this up with our largest shareholder and they clarified that they have not indulged in any discussions and no plans to sell their stake at the moment.

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