Mindtree L&T Merger: Mindtree CEO addresses buzz on merger with L&T, sustaining margins & more

“In terms of optimising the pyramid, a lot of efforts in reskilling, retraining have been done. We expect attrition to stabilise over the next couple of quarters but irrespective of that, we have rejuvenated our hiring engine and will continue to hire a lot at the bottom of the pyramid,” says Debashis Chatterjee, MD & CEO, Mindtree.


There have been reports circulating that L&T is considering to merge two of its listed tech firms – Mindtree and L&T Infotech. Has there been any discussion that the board has considered?
These are speculations and we are not able to comment on speculations and we are not able to comment on what happens with the boards.

These are speculations as of now but both the companies have a lot of synergies and they do complement each other in some or the other way. Could you just talk about the synergies and is there any meeting lined up in the near term?
I can only say that we have always acknowledged the fact that there is a lot of synergy and even for winning specific deals, we have always gone together and addressed clients issues. I do not think it is a secret that we have been working together in terms of specific opportunities, large deals whenever it is appropriate. But otherwise, we operate as independent entities.

But what is holding you back given that there are synergies and both the companies are already working together in terms of that though they are independent?
I think some of these things are not my decision and all I can say is there is a lot of speculation and I cannot comment on speculations at this point of time but as far as synergies are concerned. it has always been known and that is why L&T invested in Mindtree because they saw a lot of synergies across the two entities.

Talk about the quarter gone by. The EBITDA margin guidance for FY22 was about 20% plus and you have actually delivered that. What is the guidance for FY23?
As far as margin is concerned, we have put the processes in place which gives us the ability to execute with a lot of discipline and we were very confident that we should be able to sustain the margin that we wanted. Even getting into FY23, given the robust demand we have, given the fact that our processes are in place in terms of how we address the margin levers, our endeavour is to continue to deliver profitable growth and when I say profitable, I want to call out sustaining the margin.

ET Now: Obviously that is on the margin front but what about the growth that you are seeing because in FY22, we have seen a very strong growth of 30% plus. Is that sustainable? What should we expect from the company in FY23?

Debashis Chatterjee: We always want to grow as far as the industry grows and or even better, we have a decent portfolio of offerings as well as a set of good clients and we feel that we should be able to grow at a good pace based on how the industry is doing. We cannot comment on the industry too. One cannot be too futuristic but at least in the next two quarters, in the demand scenario that we see, we should be able to clock robust growth.

The TCV continues to hover between $350-400 million. The average of the last eight quarters is around $375 million. Has it actually plateaued and should we expect base effects to catch up? Or do you think demand momentum continues to be strong for your company?
The way we look at deal wins is in every quarter, there will be certain deals but overall, on a full year basis, that is what we feel is much more valuable. For the full year, we had $$1.6 billion of TCV for FY22 which is around 17% more than what we had in the previous year. From that perspective, we are confident that our TCV is good.

We have a very strong pipeline and the only thing which we called out even in the last quarter is that we see some of the deals becoming more iterative and shorter cycle, especially the digital transformation deals which the clients are typically using to maximise their own revenues. These deals follow one after another and one may not be seeing upfront TCV, but over a period of time, these are large deals which are done in shorter cycles, more in an iterative fashion.

So overall, given the pipeline and given the momentum, we still are very confident that as long as clients have this urgency to get ready for the future, we should be able to help them in terms of digital transformations.

What about the headcount trends, attrition, addition rate going forward?
As far as head count is concerned, we have 35,000 employees as we speak. The attrition has definitely been a little on the higher side but that is an industry phenomena. But we have taken a lot of steps to ensure that we not only control attrition but also a few things which will help.

In terms of optimising the pyramid, a lot of efforts in reskilling, retraining have been done. We expect attrition to stabilise over the next couple of quarters but irrespective of that, we have rejuvenated our hiring engine and will continue to hire a lot in the bottom of the pyramid.

How have the realisation trends been for your company? Is the company planning any merger and acquisitions? Is there anything in the pipeline given the decent cash on the books?
Yes, realisation has been slightly higher than what it was earlier but from a M&A standpoint, we are continuously looking at opportunities to do inorganic and we have a good pipeline. But at the same time, we will not do something just for the purpose of scale. It has to be in the adjacencies of the capabilities that we already have, the strategy that we have adopted and that was the case last year also in terms of M&A. The other one is the investment in core health but we are very open to doing inorganic if we get the right opportunity.