We are seeing client spend gradually increase in discretionary areas: Mindtree CEO & MD Debashis Chatterjee

By Srinath Srinivasan

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Mindtree ended FY21 with a strong order book of $1.4 billion and with successful employee retention and skilling programmes. The company posted one of the lowest attrition rates of 12.1% in Q4 FY21. Its CEO and MD, Debashis Chatterjee spoke to Srinath Srinivasan about emerging from Covid-19 disruption and the organisation’s outlook for FY 22. Excerpts:

What were some operational changes made at Mindtree with respect to employee utilisation in FY21?

We ended Q4 with over 23,800 Mindtree Minds, including a net addition of more than 1,600 Minds. Our attrition dropped to 12.1% on last twelve month basis for the quarter, from 12.5% in Q3. We have been able to contain attrition owing to a number of initiatives namely people engagement, career mapping and growth programmes, continuous learning & reskilling opportunities and leadership development. We saw an increase of approximately 50% in learning hours through the last year on our internal learning platform and have been able to staff many critical ramp-ups using our internal talent. We have just completed a wage hike cycle at Mindtree effective January 1, across the board. We have a very robust plan in terms of hiring and the numbers are only going to increase in the next couple of quarters, which will be a mix of lateral and fresher hiring.

How has recovery been in your key markets? How has client spending changed?

Recovery in all the key markets has been encouraging. Our focus and investments in Europe have begun to yield results and we continue to win important deals as the geography opens up to strategic IT partnerships. From a strong focus on cash conservation through last year, we are seeing client spend gradually increase in discretionary areas that directly impact consumer experience, revenue growth, resilience and business model transformation. We are also incubating healthcare as a strategic vertical, which will focus on delivering services in the areas of customer experience, data and cloud for payer, provider and health-tech clients.

What will be some key focus area for Mindtree in FY22 in terms of service lines and industry? Given the second wave of Covid, do you expect to make further changes to the ways of operating?

Our focus will be on continuing our 4x4x4 strategy that consists of four industries: retail, consumer goods and manufacturing; communications, media, and technology; BFSI; travel and hospitality, four geographies: North America, UK, Continental Europe, and Australia and New Zealand, and four service lines: customer success, cloud, data and intelligence and enterprise. We will enhance our domain expertise in healthcare vertical. We will also position consulting to be a focused transformation advisory piece, and work in tandem with our service lines. With respect to resuming work from office, we have set up a ‘future-of-work’ task force that has been closely watching the evolving scenario and has come up with a targeted set of recommendations that we continue to review and refine as the country goes through the second wave.

What was the major contributor to the dip in EBITDA margin in Q4 FY21?

For Q4, we reported an EBITDA margin of 21.9%, which is a marginal drop compared to Q3 from 23.1%, owing to the impact of wage hikes we rolled out starting January 1 2021, apart from the completion of a promotion cycle last year. Of the 120 bps dip, we have seen an impact of 240 bps due to wage hike and 50 bps impact from forex. However, we have been able to recover 170 bps due to our operational efficiencies. On a full year basis, we reported an EBITDA of 20.8%, which is a significant expansion of 680 bps from FY20, and gives us the confidence for maintaining 20% plus EBITDA in FY22.