Mid-sized information technology (IT) services firm MindTree Ltd posted better-than-expected numbers in the quarter ended June 30, but softened its growth outlook for the full year because of ramp-downs and cancellations of a few projects in the product engineering space (PES) and delays in decision taking.
The company, which earlier guided to outpace the National Association of Software and Services Companies (Nasscom)’s growth projection of 11-14 per cent, on Monday said its revenues in 2012-13 will be in line with the industry body’s guidance.
“Our engineering services business got impacted because of project cancellations and ramp-downs by a few clients. There is also an increased amount of caution among the clients which is delaying decision making. Considering these, we are now adjusting our projection to grow in line with Nasscom guidance,” Rostow Ravanan, chief financial officer of MindTree, said. He, however, said the company was not seeing any order cancellation in its IT services business.
During the quarter, the product engineering services remained flat with revenues of Rs 174.5 crore, whereas the IT services grew a little over than 10 per cent on quarter-on-quarter basis.
In the April-June quarter, MindTree’s net profit jumped 157.2 per cent to Rs 89 crore. The revenues, driven by new client wins and increased traction in the banking, financial services and insurance (BFSI) and manufacturing segments grew 36.3 per cent, compared with the corresponding quarter in the previous year.
On sequential term (compared with the trailing quarter), the net profit went up 28.6 per cent and revenues increased 7.1 per cent.
The company said the PES business, which accounts for over 30 per cent of its overall revenues, saw “serious ramp-downs” in two-three accounts (clients) who would have contributed $1.25 million to its revenues during the quarter. The ramp-downs, however, are limited to clients in the hardware and consumer and communication space, whereas it continues to see traction in the enterprise software product space.
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Of the 19 new clients added during the quarter, nine were in the PES space.
Among the major verticals, both BFSI and manufacturing grew four per cent sequentially. The company said its US business grew 1.8 per cent sequentially, while Europe continued to be the fastest growing geography with a sequential growth of 4.5 per cent.
In the quarter, MindTree saw 210 basis points improvement in operating margin, which went up to 20.8 percent, backed by currency benefits and operational efficiency despite giving wage hikes to a majority of its workforce with effect from June 1. Some senior level employees, who were left out during the appraisal period, will be given wage hike during September-October this year, it added.
During the quarter, MindTree improved its utilisation to 68.9 per cent whereas volume (billable man-hour used in a quarter) and pricing were flat.