We met Mr Debashis Chatterjee (CEO) and his team to get an update on strategy and business. The new management team has defused transition risk and now aiming for growth with improving margin. The company was confident of improving the margin with steady growth momentum as it completed interactions with various stakeholders (clients and employees) over the past four months.
Focus shifts to growth and margin: The new management team has worked over the last quarter to stabilise the operation after management transition. The growth momentum would be driven by large deal team and focus on top 25 accounts. Top clients activity has improved markedly over the past two months after initial apprehension on the transition. We believe strong deal wins (Q2FY20: $307 m, Q1FY20: $324 m; TTM Book-to-bill: 1.08x) would help accelerate revenue momentum with margin expansion. Reiterate ADD rating.
The management has put a large deal team under the leadership of Mr Manikandesh (Mani) Venkatachalam, hired recently from Genpact (earlier spent 8 years with Cognizant). The focus of large deal team is to incubate deals with TCV of $50 m+ while showcasing capabilities of Mindtree to clients.
In the past (5 years ago), the company had put similar deal team but failed to accelerate the momentum due to focus led by deal advisory team which could not build its focus on the services and capabilities of the company. However, the current large deal team would work with clients across multiple silos (application/infrastructure/ customer services etc.) to construct a large deal. Moreover, the company now has much stronger capabilities to manage complex large deal.
The management is already witnessing improving traction in large deals pipeline especially in Media & Hi-Tech vertical. We believe that a strategy built around the capabilities of the company would translate into success easier than the steadfast focus on winning large deals. The current size of the company would need 2-3 large deals in financial year to deliver mid-teen growth. We see the early success of the team would help accelerate revenue in FY21.