FY13 growth to be less than 11%: MindTree

Rostow Ravanan, CFO, MindTree expects growth in FY14 to be better than FY13. "Most of our US customers are fairly confident about their budgets. They are confident about the prospects for their own business," he said in an interview to CNBC-TV18.

The company is hopeful of clocking better growth in revenues if the US market performs well. However, he added that MindTree's growth in FY13 will below industry body Nasscom's guidance of 11 percent this year. "The industry as a whole was previously in the 11-14 percent range and National Association of Software and Services Companies (NASSCOM) has changed it downwards. We will be closer to the bottom end of the range. We would be below 11 percent range for this year," he elaborated. Below is the edited transcript of his interview to CNBC-TV18 Also read: IT would like RBI to look at interest rates: Infosys Q: How do you think IT budgets are shaping up in 2013?  A: Broadly the feedback we hear from most of our US customers is fairly confident. They are confident about the prospects for their own business. But the feedback from some of our European customers has been a little bit more of concern. Overall I think the year as a whole for FY13 to 2014 should be a much better year than what we saw in 2011-12. Q: Would you want to give us something by way of a revenue growth? A: To early to tell and also we don’t give guidance. However, qualitatively we feel whatever growth we achieved this year, next year will easily be a few percentage points higher than that. The largest market for all of us is the US and if the US market does well overall it should be a good growth year for the industry. More specifically that sort of feeling we have for the MindTree aswell. Q: What should I pick for this year, 15 percent? A: No this year we are much lesser than that. The industry as a whole was previously in the 11-14 percent range and National Association of Software and Services Companies (NASSCOM) has changed it downwards. Q: In the company there have been three times revision in FY12 itself. Do you see the need to further reduce your estimate given that a lot of the larger peers are doing it or do you think you will be able to maintain what you said at the end of October? A: As of now we have no plans to change our guidance. The current quarter is shaping up as we had planned in the beginning of the quarter. In October we believe the revenue growth in this quarter will be slightly better than what we showed in Q2, inspite of the seasonality, leave, holidays and everything else. So far we are tracking the full year. As we stand today it tracks to what we had explained earlier to investors. Q: Did you not say that you would perhaps be a little south of NASSCOMs 11-14 percent? A: Correct so when NASSCOM revised its guidance to say we will be closer to the bottom end of the range. We said yes we would be below the 11 percent range for this year. That’s was something that we said in October and as of now no plans to change that. We are still in the same range. Q: Do you see jostling for billings? Infosys could be playing the volume game, what would that unleash in the market? Will you adjust to lower margins? A: If it was conceptually possible to get more volumes from our competitor. Which can be by lowering prices then I would have done that day before yesterday and taken 10 percent of Infosys market share. So I don’t think customers buy purely on the basis of price. However, on a more serious note, we are trying to build the business with specialization in a few chosen areas. Customers are beginning to pay us serious attention based on the efforts we have made in that direction. So we believe our trajectory will depend on our initiative, strategy and successful implementation of those strategies. Right now I don’t think it will make that much of a difference to our trajectory, based on any one particular company increasing or decreasing its prices. Q: There is a skeptic opinion that beyond your top 10 clients you haven’t been able to add much. Do you see improvement? A: This is one of those cases where you are damned whether you do it or not. In the beginning of last year it was a conscious strategy for us to pick a few clients. Then make the necessary investments and grow those clients, without sacrificing the overall revenue concentration risk that we have maintained over the last 10 years. It was a conscious effort to pick a few of our clients, where we believe we had the best potential and we have grown that. For example if you see the number of USD 20 million customers have grown. USD 10 million customers so on and so forth. So we took up on a certain objective and we have achieved that objective. Therefore not to say that the other customers are not important, but in our medium term strategy growing a few relationships in a more meaningful manner was our objective. That is what we are working on right now. So we have not done what we did not want to do.