Topline expands by 13% QoQ during 2QFY08, largely due to 13% QoQ increase in volumes and 3% QoQ improvement in billing rates.
Operating margins expands by 0.4% QoQ - higher volumes and pricing along with 4% QoQ rise in utilisation helps profitability.
PAT grows by 32% QoQ during the second quarter – aided by margin expansion and higher other income.
Adds 28 new clients and 464 employees in 2QFY08. Annualised attrition up 0.5% to 15.7%.
(Rs m) | 1QFY08 | 2QFY08 | Change | 1HFY07 | 1QFY08 | Change |
Sales | 1,615 | 1,820 | 12.7% | 2,870 | 3,435 | 19.7% |
Expenditure | 1,359 | 1,524 | 12.1% | 2,308 | 2,884 | 24.9% |
Operating profit (EBDIT) | 256 | 295 | 15.5% | 562 | 551 | -1.9% |
Operating profit margin (%) | 15.8% | 16.2% | 19.6% | 16.0% | ||
Other income | 62 | 103 | 64.5% | 26 | 165 | 530.3% |
Depreciation | 79 | 81 | 2.5% | 111 | 160 | 44.4% |
Interest | 9 | 18 | 90.0% | 17 | 27 | 58.9% |
Profit before tax | 230 | 299 | 30.2% | 460 | 529 | 15.0% |
Tax | 24 | 28 | 16.8% | (7) | 52 | |
Profit after tax/(loss) | 206 | 271 | 31.7% | 467 | 477 | 2.3% |
Net profit margin (%) | 12.8% | 14.9% | 16.3% | 13.9% | ||
No. of shares (m) | 37.8 | |||||
Diluted earnings per share (Rs)* | 24.1 | |||||
P/E ratio (x)* | 21.8 |
In terms of geographies, US recorded a growth of 8% QoQ whereas India, Europe and Asia Pacific regions recorded growth of 39%, 24% and 16% respectively. The company in a bid to strengthen its position in Europe opened a center in the Netherlands.
R &D Service offerings | 1QFY08 | % of total | 2QFY08 | % of total | Change |
Storage and servers | 147 | 40.6% | 160 | 39.2% | 9.2% |
Consumer appliances | 97 | 26.9% | 112 | 27.4% | 15.2% |
Communication systems | 38 | 10.6% | 45 | 11.0% | 17.4% |
Automotive and industrial systems | 65 | 18.1% | 78 | 19.1% | 19.3% |
Others | 14 | 3.8% | 13 | 3.3% | -1.8% |
Total | 362 | 100.0% | 409 | 100.0% | 13.1% |
IT Service offerings | 1QFY08 | % of total | 2QFY08 | % of total | Change |
ADM | 1,078 | 86.0% | 1,195 | 84.7% | 10.8% |
Consulting | 60 | 4.8% | 48 | 3.4% | -20.3% |
Package implementation | 21 | 1.7% | 54 | 3.8% | 151.6% |
Testing | 44 | 3.5% | 66 | 4.7% | 51.1% |
IMS | 49 | 3.9% | 45 | 3.2% | -7.7% |
IP licensing | 1 | 0.1% | 3 | 0.2% | 125.1% |
Total | 1,254 | 100.0% | 1,411 | 100.0% | 12.5% |
In terms of business segment, while Transportation and Hi-tech segments recorded growth of 11% QoQ apiece, the growth in banking and financial services segment was little lower at 9% QoQ. Growth in the manufacturing segment was 13% QoQ in 2QFY08. MindTree added 28 new clients and a net off 464 (gross 784) employees in 2QFY08. The attrition levels have gone up by 0.5% in 2QFY08 to 15.7%. This is a worrying factor as, three quarters back, the company was among those that had the lowest attrition levels.
Marginal expansion in operating margins: MindTree’s operating margins expanded by 0.4% QoQ during 2QFY08. This was aided by a 4% QoQ increase in utilisation levels and 2% QoQ fall in SG&A expenses (as percentage of sales). The cost of revenues (as percentage of sales) increased from 63% in 1QFY08 to nearly 65% in 2QFY08. This was mainly due to partial wage hike affected during the quarter. In 1QFY08, the company had affected a wage hike to 53% of its junior offshore employees, which contributed to 40% of the total workforce. Now in 2QFY08, the company has given salary hikes to 53% of the employees and remaining 7% of the employees will get their salary hikes in 3QFY08. So the impact of hike in wages will be spread over the financial year. The impact of salary hikes given on EBITDA margins in 2QFY08 was 2.5% QoQ.
(Rs m) | 1QFY08 | 2QFY08 | Change |
IT Services-Revenues | 1,254 | 1,411 | 12.5% |
% of total revenues | 77.6% | 77.5% | |
PBIT margins | 19.3% | 17.1% | |
R&D Services-Revenues | 362 | 409 | 13.1% |
% of total revenues | 22.4% | 22.5% | |
PBIT margins | 4.5% | 14.3% | |
1,615 | 1,820 | 12.7% |
Higher other income boosts bottomline: MindTree’s PAT increased by 32% QoQ largely during the second quarter. This was due to a 65% QoQ growth in other income. PAT margins also expanded by 2.2% QoQ. On a YoY basis, other income has risen by 300%. This is mainly because the company had higher investments due to proceeds from IPO. The company also recorded a forex gain of Rs 33 m in 2QFY08 as against a loss of Rs 4 m in 1QFY08. This gain was mainly due to mark-to-market adjustments on forward contracts on the basis of hedge accounting.