- 14 Oct 2022
- ICICIdirect Research
Mindtree reports another strong quarter, merger with LTI to conclude at end of CY22
The company reported constant currency growth of 7.2% QoQ. Dollar revenue grew 5.7% QoQ to US$422.1 million (mn). In rupee terms, revenue grew 8.9% QoQ to Rs 3,400 crore. In terms of geographies, the growth in revenues was led by North America (78% of mix), which grew 7.5% QoQ, more or less covering de-growth in Continental Europe market in the tune of 9.1%. QoQ. UK market (6.6% mix) and APAC regions (8.5% mix) grew by 3.2% and 5% QoQ, respectively. Vertical wise, growth was driven by Technology, Media & Services (43% mix), which was up 4.3% QoQ and BFSI (19.4% mix) was up 10.2% QoQ. Travel & hospitality (15.9% mix) has also reported strong growth of 8.8% QoQ while RCM, as expected, reported decline of 0.8% QoQ (ex- currency impact, RCM was up 2.9% QoQ). EBITDA grew 6.9% QoQ to Rs 696.7 crore while EBITDA margins declined sequentially by ~60 bps to 20.5%. Reported margins were 21% (adjusted for forex losses), which were down 10 bps QoQ. Headwinds for EBITDA margins were i) -240 bps wage hike for the quarter, which were mitigated by following tailwinds i) +110 bps impact of merger related costs, which was already factored in Q1 ii) +50 bps currency benefits iii) + 70bps operating efficiency. TCV continue to be strong at >US$500mn. LTM attrition is down 40 bps QoQ. The company indicated that merger with LTI is in final stages of regulatory approval and is likely to conclude at the end of CY22.
It is the seventh consecutive quarter of 5%+ CC growth on a QoQ basis as deal TCV continue to be strong. The company mentioned that clients continue to spend on revenue maximisation and cost optimisation programs where the company is playing on both legs of growth. Muted net hiring could be on account of furlough impact in Q3 and Q4 ahead. LTM attrition has started moderating and the company expects a similar trend, going forward. Margins are expected to take some hit in Q3 due to lower growth but the company continues to maintain 20%+ EBITDA margin guidance.