Q3 volumes fell on seasonality; Q4 to be better: Mindtree

Below is the edited transcript of the interview on CNBC-TV18.

Q: What were the reasons behind the Q3 volume de-growth?

Natarajan: The Q3 volume de-growth is primarily because of the seasonality. As we had shared when we announced Q2 results, we anticipated it to be a weak quarter. Clearly, the seasonality impact because of lower working days as well as leave which Mindtree minds took was certainly much more than what we anticipated.

To that extent, all the volume de-growth is just because of seasonality. If we had not had the incremental leaves that Mindtree minds took in the third quarter and the number of working days had been the same as quarter two, our volume growth would have been closer to 3 percent. So, it is primarily seasonality driven and has nothing to do with business reasons.

Q: Last time you said Q4 will be better than Q3. Can it be as good as the cross currency growth recorded in Q1 and Q2?

Ravanan: Cross currency is outside our control so I would like to leave that issue aside but overall, the business is looking very positive so we are quite confident that Q4 will see good growth rate on an operational revenue basis.

Q: What is the overall sign for FY16? Can it be better than FY15?

Natarajan: It is early days and whatever conversations we are having with our top 30 clients the signs are positive. The theme which we are hearing from clients is that they clearly want to optimise on how they run the business, which is clearly an opportunity for Mindtree because in contracts for traditional services like application maintenance, they are willing to consider new vendors like us, so it is an opportunity.

What is more interesting is most clients are telling us that whatever they optimise on savings to run the business they are going to invest in discretionary spends particularly in the areas like digital. We see digital as a great opportunity for Mindtree and we think that in calendar year 15, discretionary spends are going to go up so we are very well positioned.

In the next four to six weeks, we anticipate clients will finalise their budgets and we will get a better view but at this point if we were to take a view on how calendar year 2015 is looking like we certainly think it will at least be as good as what calendar year 2014 was.

Q: Also digital has been a great growth driver for you in this quarter. Can you give us a few metrics in terms of growth, in terms of margins and in terms of deal winds in digital front?

Ravanan: We are continuing to win a lot of opportunities on the digital front. We are very excited about the kind of clients who are choosing us. These are very marquee names in our chosen verticals and digital is a key transformation initiative for them. We are very happy that such marquee clients are choosing us for their digital transformation initiative. It continues to be a very strong growth area. The profitability of the digital projects are approximately the same as the rest of the Mindtree’s business.

Q: You have announced major acquisition of Discoverture Solutions. The margins are more or less similar to Mindtree do you think the margins can improve due to the synergies?

A: The size of the acquisition is not large it s about three and a half million run rate per quarter. So it cannot materially impact the margin. Like you righty said the margin profile is similar to Mindtree but where we see an opportunity is that there are 15 marquee clients of Discoverture and there is minimal client overlap.

So, we see an opportunity for both cross selling Mindtree services as well up selling and take Discovertures expertise to Mindtree’s insurance clients. So, to drive a faster growth is really the big benefit which we see out of this acquisition.