Mindtree grows Q3 revenues 10% on the back of digital business; profits up 3%

Mindtree reported a modest 3% growth in net profits for the third quarter of the financial year 2020-21. The company also clocked a 10% growth in revenues during the quarter. 

The Bengaluru-based information technology (IT) services firm turned in net profits at Rs 197 crore during the quarter, compared to Rs 191 crore in the corresponding quarter in the previous financial year. The company also saw a 46% growth in net profits sequentially. In the second quarter of the current financial year, it had reported profits at Rs 135 crore.

The results are above market expectations as the third quarter is usually a slow quarter for the Indian IT industry due to the holiday season in the largest markets of North America and Europe.

The Larsen and Toubro (L&T) owned IT firm has also seen its margins improve by 260 basis points (or 2.6%) sequentially to stand at 15.6%, against the 13% it reported during the second quarter. However, the margins are still lower than the 15.9% the company had reported during the third quarter of the previous financial year.

Mindtree reported revenues at Rs 1,965 crore during the quarter under review, against Rs 1,787 crore during the same quarter in the previous financial year. The company's revenues stood at Rs 1,914 crore during Q2 of this financial year, showing a 2.7% sequential growth. 

"We have been successful in raising our margins even as we grew our revenue by 10%, which has helped us post 46% growth in net profit sequentially. We continue to execute our growth strategy, proactively incubate deals by mining strategic clients and nurture a learning-led culture," said CEO Debashis Chatterjee, who took over the reins from Mindtree's founder-promoters in August last year following the hostile takeover by L&T. He added that the company's customer surveys had indicated that the clients were happy with its services.

Mindtree's BFSI revenues grew 7.7% year-on-year despite a softening in customer spending in the vertical while its digital business grew by 13.5% year-on-year. Digital contributed to 38.2% of the company's overall revenues. 

Geographically, the United States market accounted for almost 75% of the company's sales.

Mindtree has 32 active clients and it added seven new customers during the quarter. While the company has seen a higher attrition rate during the quarter at 17.2% due to the leadership churn following the L&T takeover, Chatterjee said that it has slowed down over the last few months. The company's employee count grew by 1,500 year-on-year.

Last week, Infosys had revised its revenue guidance for the financial year for the second time this fiscal after its profits and revenues grew above market expectations in Q3.