Mindtree growth story will continue even with the merged entity: CEO

“Even if there is a little bit of softness in Q3, we are very confident that we should be on track to record leading growth for the full fiscal,” says Debashis Chatterjee, MD & CEO, Mindtree

This has been the seventh consecutive quarter of over 5% revenue growth on a constant currency basis, but given the seasonality for the future quarters, do you expect your revenue growth to slow down in the second half of FY23?
We had a fantastic quarter and this is the seventh consecutive quarter of 5% plus constant currency growth. Q3 is a seasonally weak quarter because of furloughs and fewer number of working days. As far as our growth story is concerned, we always look at an overall year. So even if there is a little bit of softness in Q3, we are very confident that we should be on track to record leading growth for the full fiscal.

What is your reading of client conservations in Europe in specific verticals?
There are a couple of aspects in terms of clients. One of the things that we had called out where clients are concerned is about some of the opportunities which are more efficiency driven, rather than discretionary and we have seen that in our order book that we closed this quarter a very good mix of transformation as well as cost take out opportunities.

Many of these cost takeout opportunities are also multi-year annuity and that is what our order book reflects. Even our pipeline has also got a similar mix of opportunities and deals. But having said that, there was specific slowness in RCM which we had called out earlier, but some of the conversations that we are having with our clients right now.

There is a bit of caution but caution does not mean that they want to pause any of the initiatives that they have started which are more revenue enhancing or change initiatives for them but some of the conversations indicate that there is a bit of caution and there is a little delay in terms of taking the decisions but overall we are not too perturbed about that because from an overall year perspective, we still have a very strong pipeline and we have a good mix of transformational as well as efficiency opportunities.

Let us talk about the margins and that indeed was the biggest highlight this quarter. It was the margin resilience that we saw in the quarter gone by. What exactly aided this sort of performance when it comes to margins? Going forward, would you say that you have enough levers to improve margins from these levels or do you think they will largely stay in the same range?
The margin story is not one quarter story. If you look at our margin story this is the eighth consecutive quarter where we have done a 20% plus EBITDA and it is a discipline that you bring in and fortunately for us, we had set the discipline right upfront where this entire management change happened and that is what has helped us in terms of retaining the margin.

At this point of time, we are very close to the regulatory approvals as far as the merger is concerned and there is a lot of focus in terms of how the merged entity will look like. But having said that, the overall vision that we have laid out in terms of profitable growth is that the vision will continue which means that we are not going to change our strategy in terms of holding the margin at a certain level and then deliver the growth because our philosophy is that hold the margin at a level and anything in excess of that we try to invest back into the business. So our profitable growth story will continue as we go along even with the merged entity.

What are the attritions and headcount trends looking like and what is the outlook on this?
From our headcount perspective, we have been very carefully doing the planning right now because two entities coming together, we will probably have an advantage of scale and so in terms of some of the slowdown in hiring for us is probably a culmination of that because we want to make sure that we look at both the sides and see how it can be beneficial for the merged entity.

As far as attrition is concerned, we had called out earlier that there has to be a slowdown and we are seeing early signs of reduction in attrition this quarter and we are hoping that there is still room for the attrition to come down as we go along.

Let us talk about the merger and what is the update on that particular front. Has anything changed in the management focus when it comes to your merger plans? Also what sort of timeline are you all actually pencilling in for the completion of the merger?
As far as the merger is concerned we have formed a steering committee and the steering committee has been working in terms of designing the new op structure, looking at various aspects of talent supply chain and so forth. There are multiple tracks that we have formed, there are a lot of regulatory approvals that we need to get. We are in the final leg of getting all the regulatory approvals and hopefully if all is going fine within this calendar year, the merger will be close.

The focus now is how the merged entity will be getting back into the same rhythm as quickly as possible. We are hoping that within the next two quarters we should be able to function more as a merged entity.