MindTree Ltd. - A midcap IT company

While doing a periodic review of my holdings, I realized that VP is missing a dedicated thread on MindTree Ltd. Have created this thread with the intent of summarizing the facts that are handy with me so that we can have more intensive and focused discussion around this company under a single thread.

@Admin - Though active on this forum for sometime, this is very first attempt at creating a new thread for the benefit of community. Have gone through the guidelines etc. and will be mindful about that throughout. Feel free to point out, just in case some inadvertent gaps are there.

  • Company Introduction:
    Some of the top executives of WIPRO established MindTree in 1999 as an IT solution and delivery company. At the early phase, was the fastest growing Indian IT player to touch $100M revenue mark within 6 years of inception. During first 8 years had an envious 38% CAGR revenue growth. However, only with the privilege of hindsight, it can be concluded that few strategic decisions had adverse impact on the company. Few examples to quote, bold move of pivoting into smartphone manufacturing by acquiring Kyocera in 2009 only to realize that this would be a money guzzling business. aggressive aspirations like USD 1 Billion target by 2014, non value accretive acquisition (Aztecsoft and few other).

In current avator the company earns ~2/3 of its topline from US. Evidently, Europe is loosing turf.

By service offering, Development, IMS and Maintenance are top 3 LOBs. Again, over a period of time, maintenance has shown a de-growth and Package implementation has gained good ground.

With intent company is transforming itself as a key Digital (SMAC) player. Digital has gained good growth currently ~40% of total revenue with expressed intent (supported by follow through action) to take it to 50% of total revenue by next 5 years.

Client concentration: Increasing dependency on Top client (from 10.80% to 14.10%). Good addition of sub $10M client count.

  • Financials:
    Company has shown good (33.66%) top line growth for FY16 as against 17.49% revenue growth. HOWEVER, profitability is under visible pressure. Q2FY17 registered a massive EBIDTA drop of 600 BPS to 12.5%, its 21 Quarters low.

As a result. ROE/ROIC has gone below industry peers.Detailed financial data can be reviewed in the attached file.
MindTree_MS template.xlsx (101.9 KB)

  • What is impacting the profitability? A picture worth thousand words. To gain traction on Digital business, they have to rely on more of onsite technical competencies. Salary raise itself had a 230 BPS dent on EBIDTA for Q2FY17.

Likewise, revenue mix is also getting skewed towards onsite projects.

  • Counter measure by Management:
    1.Healthy deal pipeline during the most recent quarter. 2x new clients TCV as compared to previous quarter and almost 3x on same quarter FY16.

2.focus and commitment towards Digital expansion. During last year they acquired BlueFin one of the top platinum SAP HANA Implementation partner to gain domain know how. Another strategic acquisition of magnet360 in the space of SalesForce implementation. Third one was DiscoverTure another premier Duck Creek implementation partner.

Overall Positives:

  1. Digital has a real long runway. On top, with the paradigm shift, this will capture good chunk of IT budget for next few years.

  1. Below industry average and 21 Quarters low EBIDTA. From IT service standpoint, a ~12% of EBIDTA can be an unheard thing. Is this the worst and only direction possible from here will be northwards?
  2. Mr. Trumps stand of a protectionist inward looking economy can be a blessing in disguise. Better job creation etc. has incremental impact on overall health of the economy. Any signs on domestic growth recovery will compel US companies to increase IT spends.

Overall Negative:

  1. Biggest drag to margins, onshore shift started happening much before Trump. Need to watch further trends with this gentleman formally in power. Any further pressure on this front will severely spook market sentiments.
  2. MindTree currently is on lower side of the ROE among industry peers. However, ironically, is on the very higher side of PE multiple. will the rule of average catch-up?

With this, I am opening this thread to the formidable ValuePickr group. Please keep on adding your insights and hard facts about the company.

Disc: Invested, no transaction in last ~6 months.



There are red flags which I am not sure how far it will affect this Company.

  1. Cafe Coffee day is the largest shareholder and you must be aware of the political background of the owner of CCD.
  2. The performance in the past is on a roller coaster ride. In fact Mr Soota was hired to turn around the Company and he resigned later. The things in the company may be mainly driven by CCD.
  3. It is surprising a tech company allows a CFO to become a CEO. Even Pai brightest CFO of Infosys was not allowed to become its CEO.
  4. A tech company needs to be innovative. Just compare this with Persistent.
  5. I dont see a brighter future for this company and one day it will be sold or merged with some other Company as the owner of the CCD will use his financial acumen/clout.
  6. What is the need for issuing 2 bonus issues to please whom.

Just do a scuttlebutt with techies in Bangalore and I dont think you will get a good opinion. These are my views and correct me if i am wrong. Only a techie can assess an IT company properly about its business and future prospects. Here in IT sector understanding the future is more important than the past, cash position and a strong balance sheet. Recall Satyam and presently HCL Tech and Techm. Ask yourself why WB invested only in Apple and not in anything else.



Good Pointers by Sethuraman but only related to management. Even promoter’s holding is very very low.

However you missed that Nalanda Capital also holds more than 9% in Mindtree. I regard Nalanda as one of best stock pickers along with RJ. No one comes near them. Their track record speaks. They have been holding Mindtree since many years. I am sure they must have done due diligence. What I am saying is may be a confirmation bias though.

I guess analysis of business is more useful in this context.

As mentioned by OP Mindtree acquired few companies, and it seems they may have overpaid for it, hence increase in goodwill which forms 23% of assets.
The Goodwill as we know is worthless asset to have and takes few years to completely write it down.

Screenshot taken from annual report, amounts in million rupees

Having said that the underlying technology of both acquired companies has good future (SAP HANA and Salesforce CRM) .
I am in IT field and have fair idea of both SAP and Salesforce.

SAP hana being new ERP product from the company is gaining good traction and the companies investing in this technology will have early mover advantage.

Salesforce is leader in CRM, while SAP and Oracle are other key players in this segment.

Some buyback news following the trend

Latest Results reflected my concerns. Be careful before initiating any position.


I have been reading this thread recently, after investing in MindTree few quarters back.

Though MindTree had good track records of industry leading growth between 2008 to 2014, things seem to have moved in negative direction after recent acquisitions.

In the Q1 FY17-18, revenue from consulting and IP has de-grown by about > 15%, which is a negative in my opinion in current scenario.
The improvement in organic and digital deal pipeline stated by Management in recent conference need to be observed further in next few quarters.

OPM dropping day by day is another big concern in this company.
Recent buy back has also not done much change in sentiments about the stock.

Though working capital position and cash flow management remain good and wage hikes to employees is a big positive, it has to show real improvements on other parameters.
The past track record of the company may need take longer time (1-2 years as well), and the investment from long term perspective may be all right but this business do not look good for mid term.

I may be wrong on some understanding as I am studying this business only for 2-3 quarters unlike some other IT companies which I know.

Disc: Invested after correction in last one year. No transaction in past 9 months.

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MindTree 3rd Quarter Result is out.

Observations from Q3 FY 18 results:

There is significant improvement in OPM from 11% to about 15% on QoQ basis, taking Net Profit up by about 13%.

Travel and Hospitality vertical has shown growth of over 8%, and US Geography has shown growth of about 7% QoQ. This is a major positive for MindTree.

Digital revenues contribute about 44% of Revenues as classified by company and have grown at 24% YoY. Thought this % break-up looks high to me, it should be understood that, companies have their own ways of classifying what is Digital, so some variations from company to company might be there.

Overall, the Double digit growth in net profits is a positive for long term share holders of Mind Tree. During past one year, it has tested patience of shareholders and if this growth comes with stable Rupee, one can expect better PAT growth if Rupee depreciates going forward.

Disc: Invested for over 1.5 years with no transaction in past 1 year or so.

  • strong Q1FY 19 performance
  • Revenue of US$241.5mn (+6.8% qoq,+20.7% yoy).
  • constant currency growth of 8.2 % qoq.
  • Mindtree’s digital revenue accelerated, to 35.5% yoy in this quarter (+19% yoy in F18) and digital deal wins grew 29% yoy.
  • The company expects revenue growth in 2Q to moderate from 1Q levels but to remain strong,and margins should improve qoq.
  • For F19, the, company sounded confident about strong revenue growth and
  • improving margins yoy on a constant-currency basis.
  • Highlights from the conferencecall: 1) Mindtree indicated that media reports about a stake sale by the promoters are baseless. It also clarified that the largest shareholder has indicated to the company that it doesn’t have plans to dilute its stake.
  1. Revenues from the top client grew 53% yoy and now stand at 19.4% of total. However, management sounded extremely confident in sustaining strong growth momentum in the top client in coming quarters. The top 2-20 clients grew 5.2% qoq and management sounded confident about driving growth within this set of accounts too.
  2. Mindtree has outlined investments of US$3.5-4mn for F19 (US$1.5mn spent in 1Q) for strategic collaborations with US academic institutions to research next generation technologies, which could fuel IP creation over the longer term. 4) Mindtree’s CFO has resigned (last date 20 July). The company expects to find a successor over the next few months.

Dear Forum members,

This is my first post in Valuepickr after following for about an year. I have learnt some basic nuances of stock analysis and picked up MindTree for analysis as I’m from IT field. I have developed my own excel in the form of checklist with supporting data from screener.in. I have attached the excel file that I used for analysis. Please go through and share your thoughts.

Thank you.

Stock understanding – Mindtree.xlsx (33.7 KB)

Disc: Not invested. Tracking it for few months.

Hi All,

Mindtree is a good IT services company, which has shown bounce back during FY 2017-18.

Generally Mr. Market gives lot of weightage to recent 1-2 quarters and that has lead to re-rating of the stock from PE of 15 to PE > 30, within one year.
This sounds too optimistic from any perspective.

Even if revenue and earnings grow by > 10% and > 20% for few years (2 years or so), any sudden rupee appreciation post 6-9 months will change the whole scenario.

One should keep expectations minimum from the current levels.

One can see the stock prices of IT companies in 2013 when rupee depreciated, and positive trend continued till 2014, and the valuations were very high (like today), and see what happened in 2015, 2016.

The holding period should be for long term (> 4-5 years minimum), since valuations are looking on higher side.

This may look very pessimistic, but in investing one should consider both the scenarios, and see if the margin of safety really exists at current levels.

Disc : No Investment. (IT Professional for 25+ years).


32% Rev growth and 65% PAT growth sounds phenomenal but market had priced in way, way more considering the price had more than doubled in the last one year. The historic median P/E is 20 and post these great numbers the P/E was still over 23. A 15% fall would bring it to historic median P/E which is what has happened today. I think it’s just par for the course considering the mood of the market.

Disc: Had traded long in Mindtree few weeks back. No current positions

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@phreakv6 , Valuations dont seem stretched considering growth its showing. I am still wondering if such a fall on decent set of numbers was seen coming. Did you see any concerns in results ?
At moneycontrol i read few brokerages downgraded this stock

Disc : not invested but interested

@zoro99 - I think at 800 it is fairly valued without any froth. I don’t see any concerns with the results. They are quite good I feel but the market was pricing in a whole lot more. Expensive to fair transitions are happening within very short periods in the current market as everyone has wised up. I am tracking for a re-entry when technicals look up.

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It was expensive at 1100. Now it’s fairly valued for the next run up if performance continues.

Additionally, when promoters go from a warning to positive forecast, it’s confusing.

Also, we need to remember that a lot of the increase in margins had to do wtih rupee depriciation.

I do not think a concentrated client base is a problem as it’s made out to be as long as it’s more than 3-4.

Disc: holding. Will evaluate further action once the Carnage ends.

L&T, which is acquiring the 20.4 percent shares from local coffee baron VG Siddhartha and firms related to him, said in a statement it had also placed an order with its broker for an on-market purchase of up to 15 percent of Mindtree’s shares at 980 rupees apiece.

First major hostile takeover in this decade. Now it remains to be seen if traders give away their shares to LT or make them stretch.


Board of MindTree is talking about the cultural difference between them and L&T. Whereas, L&T is saying that VG Siddhartha wanted out and if not them then someone else would have bought it.

To counter the move from L&T, board at Mindtree is now coming out with a buy back offer.

Story seems to get interesting now. But the question is that whether there is hostile takeover or not, will the minority shareholders benefit?

Anyone tracking it? What changed in fundamentals except for board that the price got hammered in comparison to other software stocks? Also what is the reason for deterioration in the margins?