Confident of double-digit revenue growth that can be industry-leading: Mindtree CEO Debashis Chatterjee

Mindtree posted industry-leading revenue growth in sequential terms with the highest-ever order book in Q1 of FY22. The company has also seen a growth rebound in the travel and hospitality sector. In a conversation with Debasis Mohapatra, Mindtree’s CEO & MD Debashis Chatterjee said a strong Q1 sets the tone for a healthy financial year ahead. He also said the pricing environment remains stable with early signs of discretionary spend coming back. Excerpts:

The market is factoring in the revenue growth of more than mid-teens with around a 20% margin for FY22 from Mindtree. Can we expect such growth numbers?

Let’s take a step back. We are in the first quarter, and the first quarter provides a good foundation and setting for the rest of the year. The other important thing is, this is the third consecutive quarter in which we have a more than 5% sequential growth. That gives us good momentum getting into this fiscal. Also, as per our commentary earlier, we want to reach a sustainable margin. We are very confident about double-digit growth in revenues, which can be industry-leading. Beyond that, it is difficult to call out anything specific at this point. However, I can say that it is an excellent start to the fiscal year, and we have laid a strong foundation. We have a strong pipeline, and we are well-poised to align our growth as per our 4*4*4 strategies that we have laid out.

Mindtree has clocked industry-leading growth in Q1 of FY22. Can you throw some light on the quality of revenue and its stickiness going ahead?

In the last 12-18 months, we have looked at revenues from a multi-year standpoint. For any of the opportunities we have with our client, we are looking at turning it into a multi-year opportunity. That initiative is working out well. Even during the first quarter, some of the deals we entered are multi-year opportunities, which increases the stickiness from the revenue standpoint. When the pandemic struck, clients were looking into IT cost optimisation. They were not focusing on discretionary spending.

The focus is more on running the business. But when I have conversations with our clients, it is centered around the change of business model. For instance, clients in the travel segment are focused on contact-less. In the case of CPG (consumer packaged goods) customers, they are talking about direct-to-customer or in retail, how do you make more omnichannel. In manufacturing, it is more about connected ecosystems. These conversations will translate into digital transformation, which means they require a strong partner for carrying out these transformations.

Our objective is to partner with these clients. We are partners to these clients in their digital transformation journey, which are going to multi-year engagements.

Mindtree reported its highest ever order book of $504 million for Q1 of FY22. How are these deals placed? Are these a combination of large and small contracts?

The way to look at it is when we talk about TCV (total contract value), there is a portion of it which are multi-year engagements spreading beyond this year. Some parts of the TCV are coming as renewals. Renewals can happen in many ways.

When a renewal happens, it can increase the engagement than the work we are already doing. In such a case, these can turn into a multi-year opportunity. In this (TCV), there are multiple combinations over here. Rather than using large deals, I will say these are strategic relationships and opportunities we are very proud to be associated with. A good demand environment and higher client confidence are helping us to create this robust pipeline.

The growth of Mindtree is broad-based, with the travel & hospitality vertical bouncing back quite strongly. But what about the pricing power? Can you charge a premium for value-added services to clients across verticals now?

First of all, pricing is stable. Clients had to go through difficult times during the pandemic, especially travel and hospitality were at the center. But the good thing is that most of those things are over. We don’t have that scenario where we have discounts and all other things. Right now, pricing is stable.

For services, wherever you can command a premium, you will command a premium. That is part of the game. But the good news is that we didn’t lose any of our travel clients. We stayed in very close contact with our clients and helped them wherever they required help. When the recovery is happening, they are engaging us in many aspects. For example, we are doing a lot of things in the contactless space.

We are also diversifying. We are looking at many other places within the travel where we didn’t look earlier. For instance, logistics is one area we are looking at right now. I am also happy to report that in the TTH (travel, transportation, and hospitality) vertical, we have grown more than 10% sequentially in the last three quarters.

That means as the clients are doing discretionary spending, we are at the top of their minds.

The hiring saw strong momentum in Q1 for Mindtree. Will it continue?

The demand environment is good. A good demand environment will also require a lot of hiring. That’s what has been in the Q1 numbers. Our view is as long as the demand environment remains strong, hiring will continue. So, hiring will continue as we enter into the next quarter.