Interview | Expect deal wins to go up as demand environment remains robust: Mindtree CEO Debashis Chatterjee

This is an excellent start to the fiscal year and a strong foundation for growth. This is the third consecutive quarter of 5 percent sequential growth for Mindtree and this is also profitable growth. We have been talking about sustaining the margin and that's also worked out very well.

The most important thing is the broad-based growth across industries, service lines and strong pipelines. The demand environment is really good. Clients are opening up the discretionary spends at least in the client portfolio that we see. We have been adding a lot of talent and that is what you see in terms of the order book as well, an indication of how the year will go. That is not to say that every quarter will be the same, but we now feel confident about the double-digit growth that we have been talking about. The 4x4x4 strategy is in execution mode right now and we feel that if we execute well, this will also help us in terms of accelerating the growth in the new normal.

What is your outlook for coming quarters?

We have entered the year with very strong momentum and I think this should continue. We have gone through uncertainties in the last year and we cannot rule them out again. But as of now, the demand environment is good. Based on my conversations with the clients, I can sense that they are also looking at how we can engage with them in terms of increasing their revenues, which was probably paused during the pandemic because everybody was focused on terms of not spending the discretionary vis-à-vis cash. That is also opening up slowly.

Could you shed more light on the uncertainty you are talking about? While revenue has gone up, subcontracting costs have gone up as well, which impacted the margins. Is this a trend that you see continue?

The support cost has gone up, and this is again because we had a good demand. We had a good deal of closures and we had to start a lot of engagements in a short period of time. We had to rely on subcontractors. Given the fact that we have a strong demand, we are also investing heavily in terms of talent. There might be headwinds in margin, but over a period of time for the full fiscal, we are still confident that we should be able to sustain the margins.

How are you thinking in terms of return to work and also pace of vaccination? Major IT firms like TCS have indicated that they are looking at getting employees back to work. Flipkart has said it will start calling employees to its office starting December.

Vaccination is very critical and we are doing everything we can to get Mindtree minds vaccinated and that initiative is going on. The other thing is that we are not going to get Mindtree minds back to office unless we are absolutely sure about wellness, health and safety of our employees.

From a readiness standpoint we are ready, but eventually, I think the way things will evolve will be some kind of a hybrid (model), and it will depend in terms of what clients want, security controls that we need to put in place, and eventually if there are anything that is at a corporate level, we need to lay down certain policies and principles. So all those things are important. We had planned to open up earlier as well before the second wave. In terms of getting them back, it will be based on various factors.

You had pointed out earlier as well that the pandemic is far from over. From both business and people point of view, what are the challenges you foresee, especially with the talks around the potential third wave?

We have learned from the first wave and leveraged the learning in the second wave, which was much harder than the first. So we have confidence in terms of how you deal with any kind of uncertainties with respect to this pandemic. So from the point of view of business continuity plans (BCP) we have the readiness. However from the business standpoint, what had happened (earlier) was that the clients had stalled their discretionary spending. Over the few quarters, as a part of their transformation plans, they are also trying to look at their business models through a new lens. Just to give you an example, travel and hospitality clients are talking about contactless in a very big way. That is why demand has also built significantly.

These areas also fall into our sweet spot. There is a lot of work that we can do in terms of digital transformation in all these areas. So from that perspective, demand has definitely picked up.

Is the nature of contracts changing? If so, how are they changing and how prepared are you to take advantage of it?

We are now able to talk to clients and look at some of these existing contracts and during renewals, can we look at a longer tenure or multi-year contract for the same piece of work or some added piece of work a lot with them (in terms of selling your services).

Compared to a year ago, what we have right now is more contracts, which are multi-year contracts compared to this. The other thing that has happened was, in our transformation kind of a scenario, clients are always looking at one or two digital partners. So in quite a few situations, we are the preferred digital partner for our clients in that scenario. We expect that we will get a significant amount of opportunities to work with them and help them in terms of reshaping their businesses.

Do you expect the total contract value (TCV) to go up in the coming quarters?

Yes, I think it is fair to say that. But you have got to look at TCV not just from a quarter to quarter but on a fiscal basis. We definitely expect it to go up. Now with the momentum we are seeing and the pipeline that we have built, from a fiscal standpoint, it will be a robust TCV compared to the previous fiscal.

With the increased deal momentum, and increasing attrition, how is the talent landscape looking? Can you share the numbers you are looking at?

One of the ways to look at it rather than sharing numbers is, we had a net addition of 3,400 Mindtree minds in the last quarter. Considering the demand environment, pipeline and order book, I think the robust hiring is going to continue and it will be a fine balance of freshers as well as laterals. But we are increasing hiring as far as freshers are concerned. But the overall strategy will always be a combination of both.