Company Overview: Verticals and The Services Provided

Company Overview
Mindtree is a global technology consulting and services company that utilises digital and cloud
technologies to serve enterprises across various industries. The company was founded in 1999 and
went public in 2007. It was listed on the Bombay Stock Exchange (BSE) and the National Stock
Exchange (NSE) and was oversubscribed by more than 100 times at the time of IPO. Larsen & Toubro
(L&T), one of the major conglomerates in India, took control of Mindtree in June 2019. L&T currently
holds over a 61.08% stake in the company.
Verticals and the Services provided:
The company started with Application Development and Maintenance (ADM) as the mainstay. But
later the company has restructured itself into various other services through numerous acquisitions.
Mindtree is currently organized into four verticals –
1. Retail, Consumer Packaged Goods and Manufacturing (RCM)
2. Banking, Financial Services and Insurance (BFSI)
3. Communications Media & Technology (CMT) and
4. Travel and Hospitality (TH)
Mindtree offers various services like App development and maintenance, Digital Services, Data
Analytics, Enterprise Application Integration, Engineering R&D, Testing and Enterprise Application
Services.
Subsidiaries and Acquisitions:
Mindtree has acquired 11 firms over the years to support its operations, with the latest acquisition
being ‘Market 360’ in 2016 to assist in Salesforce consulting. Mindtree has five subsidiaries across
China, United Kingdom, United States, Malaysia and Singapore. The company has offices in 17
countries across the world.
Revenue recognition:
Revenue is generated primarily from software development and related services. Generally revenue
is recognised when the company transfers control over a product or service to a customer. The
recognising method depends on the nature of the services provided:
1. Time and Material Contracts
2. Fixed-price Contracts: Here the revenues are recognised through the ‘percentage of completion’
method. Percentage of completion depends on the project costs incurred to date as a percentage of
total costs estimated for the project. If the total cost estimates exceed the revenues in the
arrangement, the estimated losses are recognized in the consolidated profit and loss statement.
3. Maintenance Contracts: Revenue is measured ratably over the period of contract.
Sustainable Impact:
Mindtree strives to be a sustainable organization by adopting global best practices and by supporting
the United Nations Sustainable Development goals. The company is constantly trying to reduce its
carbon footprint for the betterment of the environment. 74.8% of the energy used is renewable and
94.6% of the waste is recycled.
Corporate Social Responsibility:
For the historical analysis, we looked at the performance of the firm for the past 7 years (FY 14-15 to
FY 20-21) and calculated various metrics and tried to analyse the reasons for the changes.
Consistent growth in revenue
Mindtree has had a continuous growth in its revenue driven by broad based growth across all the
four verticals and across all geographies over the years. Continuous investments across various
geographies, especially Europe led to this steady revenue growth. Over the past 10 years, revenue
for Mindtree has grown at a CAGR of 12.5%, whereas the industry average stood at 9.8%.
The company’s ‘4X4X4’ strategy of focusing on the top 4 industries, top 4 services and top 4 regions
is working as the revenue contribution of the top 10 clients increase to 40.6% from 35.7% a year ago.
The revenue growth for FY20-21 was 2.6% when compared to 10.6% in FY19-20 due to the
pandemic. This was because of the softness in the revenue growth in the first half of FY21, which
was followed by the recovery and emergence of a new normal. CMT and RCM verticals had increase
in revenue during the year. However, BFSI and Travel and Hospitality (TH) verticals faced decline in
revenues driven by the pandemic. But with the world returning to normal, BFSI and TH verticals are
bound to increase which will only further increase the revenue growth in the future.
High return ratios driven by increase in profitability and efficient usage of capital
Mindtree had maintained an ROCE of above 20% over the past five years and the value stood at 32%
for FY20-21. This shows how efficiently the company was able to utilize its capital to generate
profits. This stable ROCE means that the business can consistently put money in the business and
generate high returns. In addition, the company was also able to maintain an average RoE of 21%
over the past five years which is higher than the ideal long term average RoE of 15%. This shows the
company’s efficient usage of shareholder capital. These ratios indicate that Mindtree is a positive
growth company.
Strong EBITDA and EBIT margins:

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Company Overview

Verticals and the Services provided:

1. Retail, Consumer Packaged Goods and Manufacturing (RCM)

2. Banking, Financial Services and Insurance (BFSI)

3. Communications Media & Technology (CMT) and

4. Travel and Hospitality (TH)

Subsidiaries and Acquisitions:

1. Time and Material Contracts

3. Maintenance Contracts: Revenue is measured ratably over the period of contract.

Consistent growth in revenue

Strong EBITDA and EBIT margins:

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