Mindtree may have to fight harder for deals: Experts

Bengaluru | Mumbai: Mid-tier IT services provider Mindtree may have brought on board new leaders to change the core components of its business to become a larger entity, but analysts say more needs to be done to bring in sustainable growth despite rising profits.Management commentary that it would strive to win more managed services contracts has made some analysts concerned, who said it would have to compete against larger rivals with the shift.According to Aniket Pande, an analyst at brokerage firm Prabhudas Lilladher, Mindtree has “historically excelled in discretionary spending, (and a) shift in managed services contracts is not their strength”.Mrinal Rai, Principal Analyst at research services firm Information Services Group, said this would mean that the company will directly compete with some of the large service providers who have been ramping up their ability to win digital contracts after losing to smaller firms possessing niche digital capabilities. “Another challenge could be to retain the customer confidence and the perception that Mindtree still runs on old values with new leadership and focus while delivering large-scale managed services work. Yet another challenge that could come up is to leverage complementary capabilities across LTI (L&T Infotech) and Mindtree,” he added.The company is of particular interest to investors since it went through a hostile takeover last year and has seen a slew of exits in top management. The company has brought in Debashis Chatterjee from Cognizant to lead the company after its takeover by engineering conglomerate Larsen & Toubro.The company has seen some turbulent quarters since the change in leadership. During the first quarter of the current fiscal year, at the time of earlier CEO Rostow Ravanan’s exit, net profit halved sequentially to Rs 92.7 crore. Chatterjee was appointed in August and since then the firm has bettered its performance.Revenue grew 1.5% sequentially to $275.2 million and profits by 44.7% to $27.7 million in the third quarter ended December 31.Chatterjee, however, will need to lessen the company’s dependence on Microsoft — which contributes about 20% of its revenue, some analysts said. “Concentration with any one firm is always a concern and Microsoft is clearly a large component of their revenue. Mindtree must work hard and fast to add additional clients to balance this out. That is not to say they should not attempt to further grow Microsoft but in addition they have to add other clients faster,” Peter Bendor-Samuel, CEO of IT advisory Everest Research, said. Ray Wang, chief analyst at Constellation Research, is however optimistic about growth opportunities that Mindtree can tap into with Chatterjee at the helm.

from Economic Times https://ift.tt/38KCfE6