Mindtree Limited Q1 FY23 Earnings Conference Call Insights

Key highlights from Mindtree Limited (MINDTREE) Q1 FY23 Earnings Concall

Management Update:

• MINDTREE onboarded 4,700 employees in 1Q23, including more than 1,500 fresh graduates. LTM attrition for 1Q23 was 24.5%, which MINDTREE said would take a few more quarters to stabilize.

Q&A Highlights:

• Mukul Garg of Motilal Oswal asked about TCV deal wins, and the mix of annuity vs. project business. Debashis Chatterjee CEO said that in terms of TCV it’s a 13% YoverY growth. There is some component of TCV that will carry over to the following year with a multiyear opportunity.

• Sulabh Govila with Morgan Stanley asked if the TTM decline in book-to-bill ratio would change the near term growth trajectory. Venu Lambu ED replied that on book-to-bill ratio, MINDTREE has been floating around 1.2, with 6 consecutive quarters of 5% plus growth. Therefore the time lag from book-to-bill has not changed.

• Sulabh Govila with Morgan Stanley also enquired about employee cost per capita coming down. Vinit Teredesai CFO said it’s mainly due to increase in fresher intake. And now, 20% of the overall MINDTREE population is in the fresher category.

• Abhishek of Nomura asked about margin outlook for FY23 and 2Q23 post salary increases. Vinit Teredesai CFO replied that 20% plus is where the company believes its business is at a good place. It might fluctuate each quarter but the endeavor is to sustain 20% margin. Also wage inflation may not have an impact on MINDTREE and should be able to sustain margin in the 20% plus range.

• Dipesh Mehta of Emkay Global asked about how deal pipeline is shaping up. Venu Lambu ED answered that MINDTREE is seeing an increased traction in demand, overall at an aggregate level. However, there may be pockets of softness here and there. But at overall level, the demand still is positive.

• Manik Taneja from JM Financial asked about the ability to keep utilization rates higher despite hiring large number of freshers. Debashis Chatterjee CEO said that it’s about the ability to plan and execute. There is nothing different the company is doing; it’s skilling and absorbing freshers into projects in a more effective way.

• Manik Taneja from JM Financial also asked about DSO outlook. Vinit Teredesai CFO said that the company’s cash collection machinery is working well. MINDTREE added that if it’s able to sustain DSO below 60 days, it will be a good outlook to consider going forward.

• Manik Taneja from JM Financial enquired about fresher addition for FY23. Vinit Teredesai CFO replied that MINDTREE will be probably looking at closer to 7,500 to 8,000 freshers.