Q3 Results: Mindtree’s Profit Declines But Meets Estimates

Mindtree campus in Bengaluru, India (Phorographer: Nishant Sharma/BloombergQuint)

Mindtree Ltd.'s profit met estimates even as it fell because of a one-off gain in the base quarter.

Net profit declined 7.3 percent sequentially to Rs 191.2 crore in the October-December period, according to the software services provider's exchange filing. That's in line with Rs 189-crore consensus estimate of analysts tracked by Bloomberg.

Revenue rose nearly 1.8 percent over the previous quarter to Rs 1,787.2 crore in the December quarter—lower than Rs 1,802-crore estimate. Its dollar revenue was up 2.1 percent sequentially at $251.5 million.

The revenue growth was led by strong client wins, that shaped up the company's performance since the last three to four quarters, Mindtree's Chief Executive Officer Rostow Ravanan told BloombergQuint, adding that the margin improvement came from its operational efficiency.

Earnings before interest and tax rose 5.6 percent on a sequential basis to Rs 242.3 crore for the third quarter, meeting analyst expectations. EBIT margin expanded 50 basis points over the previous quarter to 13.6 percent. The company's constant-currency revenue grew 2.4 percent.

Average rupee rate in this quarter was almost flat compared to last quarter, so we didn't get any either benefit or impact because of currency...It is more operational improvements that led to the 50 basis points margin improvement in this quarter.

Rostow Ravanan, chief executive officer, Mindtree

The company is not seeing any pricing pressure whatsoever, Ravanan said, adding that the customers today do not worry much about the pricing, but are driven by the value proposition outcome.

He also shrugged off any concerns about the wage hike and said if the company is able to deliver strong value proposition outcome to its customers, the margins will be taken care of irrespective of which direction the costs go.

The software services company also declared an interim dividend of Rs 3 per share. The record or cut-off date will be Jan. 24 and shareholders will get the payout on or before Jan. 31.

Brexit Concerns

The volatility amid Brexit uncertainty makes us stay awake a little bit more longer at night, Ravanan said, adding that managing this is an extra workload that they have to live with. “It's something that we are very conscious of, watching very carefully and calibrating our plans accordingly. It's also making us stay in touch with our clients much more.”

Shares of the company are up 2.5 percent in the afternoon trading, a day after the results were announced.