Not losing sleep over demand outlook: Mindtree’s Venu Lambu

DH Interview

Mid-tier IT firm Mindtree has not seen any indication of slackening demand so far and is confident of maintaining its growth momentum in the near term. In a wide-ranging interview, Venu Lambu, Executive Director & President, Global Markets told DH’s Debasis Mohapatra that he expected deal sizes to get bigger after it combines with L&T Infotech to form a single entity. Edited excerpts.

How is the overall demand for IT services shaping up amid recession fears?

Firstly, there are various models and scenarios being put across by different stakeholders on whether there will be (a) recession, and how things will evolve. I don’t see any material change in demand in the near term. What we have said is that we are confident of the first half, we hold on to it and we are confident of delivering the same level of performance. As things evolve, we will make the adjustments over time. But at this point of time, I am not losing sleep over that. In the near term, we don’t see any material impact. We have conversations with customers and we realise that customers’ own demand has not gone down. That is the reason that we are confident about our growth in the first half.

While net employee addition has fallen for TCS and HCL, you seem to have maintained it. How?

We have launched a very robust freshers’ programme. We committed that we would hire 5,000 freshers in a year. Our attrition remained almost the same and there is a chance to make it better. I hope that industry attrition will come down and that will help us. Our net addition is part of the plan. When we said industry-leading growth at the beginning of this quarter, we planned a certain capacity and it is going as per the current plan. I think we will have the same amount of net addition even for the second quarter.

Many IT firms are currently able to negotiate higher prices from their clients. Are these hikes sustainable if enterprises start facing cost pressures owing to the slowdown?

Let me put it this way. I don’t see any change in unique prices. I don’t think anybody is asking for a reduction in unique prices. But, there is always a continuous ask from clients to get better productivity, either through reengineering the delivery models or through automation, or (by) bringing AI capabilities in certain areas or even bringing a better pyramid. There may be certain sectors that may ask us to be more aggressive with automation.

Mindtree’s operating margin improved sequentially in the latest quarter, even as some of its larger peers saw a fall on that front. Do you think the current operating margin is sustainable?

We have always strived toward delivering profitable growth and so far, we have delivered on that promise. I hope we continue to move in that direction. Our endeavour is always to be a profitable, growth-oriented company. As we say we want to be 20 per cent EBITDA and we are at it.

Tell us about your deal pipeline. How long do you wait to realise revenue after clinching a deal?

Considering that a significant number of deals are digital transformations in nature, the time to realise revenue from the time we booked the order is actually shorter. The duration between order book and revenue realisation is actually much shorter. That helps us to get increased revenue momentum.

Do you expect deal sizes to be bigger post your deal with L&T Infotech? How do you see the agility of the combined entity after the merger?

Look, we can’t lose agility because agility is one of the competitive differentiators for any business. We as a management team will make sure that we don’t lose agility. We are absolutely conscious of it. As we continue to be bigger, we will maintain agility, flexibility and transparency. As far as deal sizes are concerned, of course, the equation has to be one plus one is greater than two. That’s our intent. We closed one deal this quarter where Mindtree signed a deal with one of the large European travel platform companies, and we partnered with L&T Infotech for certain capabilities. We both came together and got the deal home. That’s a great playbook for us and we will see how to scale this up once integration happens.