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Interview | Mindtree CEO Debashis Chatterjee: We are at an advantage, growth momentum will continue

“We never lost a client during the pandemic, and we stayed very close to our clients, so that when clients started the transformation work and reimagining their business models, we could help them in terms of the transformation. This is culminating in terms of where we are today,” he says.

January 20, 2022 / 02:32 PM IST
Mindtree CEO Debashis Chatterjee (Image: Mindtree)

Mindtree CEO Debashis Chatterjee (Image: Mindtree)

Bengaluru-based IT services firm Mindtree has been consistently reporting strong growth numbers for the last few quarters, and it was no different for the third quarter that ended in December 2021. It reported a 5 percent sequential revenue growth in constant currency, and  increased margins, even as attrition shot up to 21.9 percent as competition for talent heats up. The travel, transportation and hospitality vertical, which accounts for about 13.8 percent of revenue, grew the highest, at 7.4 percent, sequentially.

The company is also going all out on balancing the pyramid by doubling down on freshers in FY23, with demand momentum expected to sustain.

In this interview with Moneycontrol, Debashis Chatterjee, CEO, Mindtree, shares what is driving the demand momentum in travel, and why talent will be a differentiator, and how the company is looking at it.

Edited Excerpts:

Mindtree reported a 30 percent year-on-year (YoY) increase in both revenue and profits, and close to 5 percent growth, consistently, over the last few quarters. But travel, which was the hardest hit during the pandemic, grew the fastest. Could you share what is driving this growth, and also specific to travel?


So, the growth has been fairly broad-based. And, you know, specific to travel, I can say that. You know, in the last several quarters, we have also diversified our travel portfolio. We are now working in surface transportation, cruise liners, and even food and beverage, which means that the portfolio has become a little more resilient.

This has culminated in terms of revenues hitting a $200 million run rate, which is better than the pre-pandemic levels. So, overall, we feel that travel has made a good recovery. Our top client has continued to grow and the good news is that the strategy of account mining, putting that four-by-four-by-four strategy, staying focused in terms of service lines, and industries is working out extremely well.

In fact, if you just look at some data points, our clients grew 17 percent YoY, while the top 2 to 20 clients grew 41 percent YoY. This is an indication that our account mining strategy, cross- selling and upselling are all working out fairly well.

While the travel vertical has seen growth return, do you see headwinds because of Omicron?

The base of travel, transportation and hospitality have really come down. So, obviously, in the last five quarters, we have been able to clock good growth, as I said, through diversification. As far as Omicron is concerned, we have been observing it very closely. We are working with our clients and ensuring that we are looking at the impact as well.

The good news is that the portfolio is quite resilient right now and diversified. If you look at sectors like car rentals, they may be having a great traction. Similarly, if you look at business travel and cruise lines, they will probably have a greater impact due to the virus. So, it is not that every client within our portfolio is going to get impacted in the same way because of the virus. We never lost a client during the pandemic, and we stayed very close to our clients, so that when clients started the transformation work and re-imagining their business models, we could help them in terms of the transformation, which is culminating in terms of where we are today.

You have expanded margins by over 100 basis points, even as your attrition has actually gone up this quarter to 21 percent. So, can you take us through what levers really helped you?

Margin is not a one quarter story. We have a very good process and a mechanism in place to manage margins. There are multiple levers that we use and each lever is not going to be applicable in every quarter. At an overall framework level, we have a very good mechanism to manage the margin as we go along. Just to give you an example, the subcontractor cost has come down this quarter, whereas it had spiked in the last two quarters. When you are getting into newer deals, you do need to start those deals and you need subcontractors.

What should investors do with Mindtree post Q3 earnings: Buy, sell or hold?

But over a period of time, you also put a plan together to replace the subcontractors by balancing the pyramid. We have been hiring more freshers in FY22, compared to earlier years and this number will even increase further next fiscal. So, we are looking at how you hire more at the bottom of the pyramid and how can you train them more effectively in terms of the digital skills we require.

There are some situations where we have got better pricing with some clients. They understand that some of the digital skills are at a premium. Operational efficiency and a little bit of help from currency helped as well.

Do you see pricing improving in the coming quarters, if not in long-term projects, at least in short-term ones, and what are the factors?

There are probably three areas where clients are spending dollars now. One is digital transformation, as they try to maximise revenues. The second is cost optimisation, and the third is workplace modernisation, which clients are also looking at.

I think pricing has been stable and will remain stable in the second area. But if you look at the transformation, it's all about the time to market. So, you know, in specific situations, we do see that clients are more focused on time to market rather than just the pricing aspect. Many deals are also going to be outcome-based ones, which also help in terms of pricing. But, overall, pricing has been stable. For some of the larger and new deals we are signing, we are able to get a slightly different, favourable price point.

Recent ISG notes spoke about how 81 percent deals now are small- and mid-sized because enterprises are breaking down deals to speed up digital transformation. So will this be advantageous to Mindtree?

We are definitely at an advantage. If you look at digital transformation today, the deals are delivered over multiple sprints. But what happens is that these transformation deals will come with a long tail of growth. This develops into larger strategic engagements for us. And that has been evident in the growth of the accounts. This is nothing but cross-selling and upselling in terms of a lot of digital transformation deals that may be short cycle, but kind of helping us to become a strategic partner over a period of time.

So, multiple, short-cycle deals, eventually, become long-term, but you may not be able to lock that in the order book then and there. It will keep on following. So the pipeline is very strong. We are at an advantage because we are nimble, we are agile, and we have the capabilities which are very focused on digital. And we feel that, given this scenario, growth momentum will continue.

Could you also touch upon hiring? You did mention that you see attrition stabilising. How are you planning to invest in more freshers in the coming fiscal? 

For this full year, we had initially planned to hire around 5,000 freshers, apart from laterals. Overall, our target is to have an almost uniform mix of laterals as well as freshers. That's the aspiration we have. That's the ideal scenario, which is not the case currently.

We are very clear that we have to focus more on freshers and that's why we have launched a lot of programmes within the organisation to hire BSc and BCA graduates. We're also creating a master's degree plan for them. We have completely rejuvenated the campus programme and I have personally participated in that. We have said that hiring of freshers should increase at least 40-50 percent next fiscal.

Does that mean you will be hiring 7,500 freshers in FY23?

You can do the math, but, as I said, the reality is that the focus on hiring people at the bottom of the pyramid has already significantly increased and that momentum will continue in the next year.

You will be competing with start-ups, internet companies, IT companies and also hyper scalars for freshers. Is there a different way you will go about this?

I think you have to do things differently. One of the things we have put in place is that if we get freshers, we move them to various projects, give them the right learning opportunities and the ability to rotate from one vertical to another vertical, and one technology to another.

Another thing that we have done is we have also reorganised ourselves to put an additional emphasis on talent strategy. We have aligned all the talent functions much more closely, so that we are much more agile and nimble in terms of not only just acquiring talent, but in also how you nurture talent, how you look at their careers and what kind of interventions you need to do in a very agile fashion.

We now have a Chief People Officer, who is now owning the entire talent function and their talent supply chain, which was not the case earlier. So we have also done a bit of reorganisation, just to address the point that talent strategy has to be a differentiator as we go along.

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Swathi Moorthy
Chandra R Srikanth is Editor- Tech, Startups, and New Economy
first published: Jan 17, 2022 09:29 am
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