Management Discussion and Analysis


Readers are cautioned that this discussion contains forward looking statements that involve risks and uncertainties. When used in this discussion, the words “anticipate”, “believe”, “estimate”, “intend”, “will” and “expect” and other similar expressions as they relate to the Company or its business are intended to identify such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. The following discussion and analysis should be read in conjunction with the Company’s financial statements included in this report and the notes thereto. Investors are also requested to note that this discussion is based on the consolidated financial results of the Company.

Economy & IT Services Industry

Global economy strengthened during the second half of 2013. The overall world economy is expected to improve further in 2014–15, largely on account of recovery in the developed economies. Global growth is projected to be around 3.6% in 2014, rising to 3.9% in 2015 as compared to 3.0% in 20131 .

Growth in the United States is expected to be 2.8% in 2014, up from 1.9% in 2013. Euro area is turning the corner from recession to recovery. Growth is projected to strengthen to 1.2% in 2014 and 1.5% in 2015, but the recovery will be uneven amongst nations in the Euro Zone.

Growth in the emerging market and developing economies is expected to increase to 4.9% in 2014 and to 5.4% in 2015. Growth in China rebounded strongly in the second half of 2013, largely due to acceleration in investment. China grew by 7.7% in 2013, same as in 2012. It is expected to grow by 7.5% in 2014. Growth in India picked up after a favorable monsoon season and higher export growth and is expected to firm further on stronger structural policies supporting investment. It grew by 4.4% in 2013 and is expected to grow by 5.4% in 2014. Many other emerging market and developing economies have started to benefit from stronger external demand in the developed economies and China.

Global IT services spending has shown recovery, driven by improvements in macro-economic fundamentals. Worldwide spending on IT services accelerated by 4.5% in 2013 compared to 1.5% growth in 2012. The total IT services spending is expected to carry the momentum further into 2014.

As per NASSCOM, the worldwide IT-BPO outsourcing market size grew by 8.1% to $134-140 billion in 2013. India continues to be the leader in the ITBPO outsourcing market, with a significant cost-advantage and with a 55% market share, up from 52% the previous year. Indian IT-BPO companies captured 90% of the incremental market, showcasing its increased significance in the global outsourcing market. NASSCOM estimates that Indian ITBPO services exports shall grow by 13-15% to $97-100 billion in FY2015, compared to~13% growth in FY2014. There is significant headroom for Indian players to grow. This is reflected in the relative growth rate of Indian players, which is more than double the growth rate of overall market.

The emerging technologies are poised to redefine the future of the IT services industry. These are popularly known as SMAC (Social, Mobile, Advanced analytics, Cloud) technologies. Many companies, both in consumer as well as supplier side, have started embracing the change. Companies have started creating designation like Chief Analytics Officer, Chief Data Officer and Chief Innovation Officer while IT suppliers have begun creating Center of Excellence (CoE) in these areas.

The overall IT services demand is expected to be higher from traditional markets like US, UK and Continental Europe compared to the Rest of the World.

1 World Economic Outlook(WEO) update, IMF, April 2014

Financial Performance

The table below gives an overview of the consolidated financial results for 2013-14 and 2012-13:



FY14 has been a momentous year for Mindtree. We crossed the significant milestone of half a billion mark (in $) in revenues. Revenue for the year in $ terms grew by 15.1% to $501.5 million. This is mainly attributable to the progress in our effort to increase our strategic relevance to our clients. Some of the key interventions that have yielded positive results are:

  • Our client mining initiatives continue to yield good results. Our top 10 clients have grown at 19%, faster than Mindtree’s average.Our $ 20 million clients increased from 5 to 6, $ 10 million clients increased from 9 to 13 and $ 5 million clients increased from 20 to 24.
  • Our recent wins have been multi-million dollar and multi-year wins. Our initiative of having separate teams for hunting and farming is improving our ability to get better quality deals. Our revenues from new logos has increased from 3.6% in FY13 to 4.1% in FY14. We have invested significantly in our front end sales teams towards this initiative.
  • Our positioning as multi-segment specialists is progressing well, resulting in an all-round performance from most verticals and service lines. Our revenue from Infrastructure Management and Tech Support grew by 52.2%, followed by Maintenance revenue which grew by 21.5% in the current year. Among the verticals, Manufacturing, CPG and Retail grew by 30.1%, followed by BFSI and Travel & Transport which grew by 18.4% and 16.2% respectively.
  • From a mix perspective, growth has been driven by onsite revenue (growth of 27.4%) as compared to a growth of 7.2% in offshore revenues. The increase in onsite traction is due to the nature of client engagements, which are critical in nature and which requires near shore delivery. Our presence through a delivery center in Gainesville, Florida is also showing good traction in terms of our near shore delivery.
  • From a geography perspective, America and Rest of the World have grown significantly by 17.4% and 37.9% respectively.

A graphical presentation of revenue analysis based on various parameters is given below.


Revenue distribution by geography


Revenue distribution by service offering


Revenue distribution by industry


Revenue distribution by mix


Other income (excluding foreign exchange gain)

Other income for the year ended March 31, 2014 is Rs. 376 million and has increased by Rs. 26 million over the previous year (Rs. 350 million). This is mainly because of higher investment income during the year.

Foreign exchange loss/gain

Foreign exchange gain for the year ended March 31, 2014 is Rs. 120 million as compared to a loss of Rs. 340 million in the previous year. The gain is mainly on account of better realization as rupee depreciated by 11.5% during the year.


Employee benefits expenses

Employee benefits forms our largest cost. At 58.8% of the total revenue from operations, it includes the fixed as well as the variable components of employees’ salaries, contribution to provident funds, gratuity etc. Staff welfare expenses incurred for the employees also form a part of this cost. Break-up of this head of expenses in comparison with previous year numbers is given below:


Total employee benefit expenses have increased by 24.8%. In relation to revenues, employee benefits expense has reduced by 1.6% from 60.4% to 58.8%.

Though the rupee depreciated by 11.5% during the year, the benefit of rupee depreciation is offset by increases in compensation, addition of employees in billable roles and significant investments in our front end sales teams.

Other expenses

Other expenses comprises of all other incidental costs apart from employee benefits costs like travel, rent, computer consumables etc., The breakup of the same is as given below:


Other expenses, in relation to revenue has increased by 2.1% as compared to last year. Travel expenses have increased by 0.8% while subcontractor charges have increased by 1% forming a major reason for increase. The other heads of expenses have shown a marginal increase as compared to last year.

On an overall level, other expenses have grown by 42.8% as compared to last year mainly due to increases in travel expenses, sub-contractor charges and legal and professional charges which have increased by 56.8%, 63.3% and 55% respectively.

Profitability and Margins

  • We crossed a significant milestone of $100 million in operating margins/ EBITDA. EBITDA margins have dropped marginally from 20.6% to 20.1% in the current year. The decrease is primarily attributable to:
    • Increase in other expenses by 2.1% and
    • Offset by a decrease in employee benefits expenses by 1.6%, as explained above in the employee benefits expense and other expenses paragraphs.
  • Our effective tax rate has increased from 20% in the previous year to 22% in the current year. This is mainly because of increase in surcharge from 5% to 10% in the current year.
  • PAT has increased from 14.4% to 14.9% in the current year mainly due to foreign exchange gain of Rs. 120 million in the current year as compared to a loss of Rs. 340 million in the previous year.

Segmental Reporting

Effective April 1, 2013, the Group has restructured its organisational and management structure and its internal financial reporting structure to be better aligned to market needs. Pursuant to such re-organization, the Group has identified Manufacturing, BFSI, Hitech, Travel and Transportation and Others as its reportable business segments. Accordingly, as required by the Accounting Standards(’AS’), comparatives have been restated and presented in line with the current segments.

The accounting principles consistently used in the preparation of the financial statements are also consistently applied to record income and expenditure in individual segments.

Income and direct expenses in relation to segments are categorised based on items that are individually identifiable to that segment, while the remainder of costs are apportioned on an appropriate basis. Certain expenses are not specifically allocable to individual segments as the underlying services are used interchangeably. The Group therefore believes that it is not practical to provide segment disclosures relating to such expenses and accordingly such expenses are separately disclosed as unallocable and directly charged against total income.

The assets of the Group are used interchangeably between segments, and the management believes that it is currently not practical to provide segment disclosures relating to total assets and liabilities since a meaningful segregation is not possible.

Business Segments


Significant changes in Balance Sheet items

  • Increase in reserves and surplus of Rs. 3,266 million is due to:
    • Securities premium account increased by Rs. 83 million because of exercise of employee stock options.
    • General reserve increased from Rs. 1,091 million to Rs. 1,542 million due to current year transfer to reserve on account of dividend declaration (as per limits prescribed by the Companies Act, 1956).
    • In accordance with AS 30, the exchange gain from derivative instruments which qualify for cash flow hedge accounting is credited to hedge reserve to the extent of Rs. 49 million (previous year Rs. 173 million).
    • Balance in the statement of profit and loss increased from Rs. 9,236 million to Rs. 12,072 million due to current year profits.
  • Other long-term liabilities have increased to Rs. 129 million as compared to Rs. 57 million in the previous year. This is mainly due to provisions made for payment of stock appreciation rights for employees.
  • Short-term borrowings as at March 31, 2014 are Nil as compared to Rs. 217 million as at March 31, 2013 due to repayment of packing credit loan of $4 million (net) during the current year.
  • Other current liabilities have increased by Rs. 572 million mainly because of increase in employee related liabilities (Rs. 223 million) and other liabilities (Rs. 205 million). Unearned income, creditors for capital goods and advance from customers have also increased by Rs. 64 million, Rs. 70 million and Rs. 61 million respectively. This is offset by decrease in book overdraft by Rs. 51 million.
  • Short term provisions have increased by Rs. 462 million, due to provision for dividend and dividend tax payable (Rs. 297 million), provision for discount (Rs. 86 million), provision for employee benefits (Rs. 49 million), provision for taxes (Rs. 20 million) and others (Rs. 10 million).
  • Additions to fixed assets during the current year is Rs. 1,657 million (previous year Rs. 626 million) mainly on account of Computer systems and software and leasehold improvements.
  • Long-term loans and advances have increased by Rs. 141 million mainly due to security deposits paid for Chennai and Hyderabad office.
  • Our cash generation during the year has been healthy. Our cash and investments (net of short term borrowings and book over draft) have increased from Rs. 5,149 million as at March 31, 2013 to Rs. 6,427 million as at March 31, 2014.
  • The Days Sales Outstanding (DSO) as at March 31, 2014 is 72 days as compared to 70 days at March 31, 2013.
  • Other current assets have increased by Rs. 447 million mainly because of increase in unbilled revenue (Rs. 377 million). Prepaid expenses and deposits (current maturities) have increased by Rs. 66 million and Rs. 85 million respectively. This is offset by decrease in derivative asset by Rs. 88 million.

Let's Talk About Your Needs

Thank you for your submission. We'll be in touch.