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.

Industry outlook, structure and developments

Global economic growth was 3.4 % in 2014 and is projected to reach 3.5 % and 3.8 % in 2015 and 2016, respectively. This reflects a pickup in growth in advanced economies relative to the previous year and a slowdown in emerging market and developing economies, especially China.

Despite a disappointing first quarter, the US grew at 2.4 % in 2014. This is the best full year growth since 2010. The US is expected to grow at 3.1 % in 2015 as well as 2016. This growth will primarily be driven by capital growth.

The Euro area grew at 0.9 % in 2014 as compared to 0.5 % in 2013. It is expected to grow at 1.5 % in 2015 and 1.6 % in 2016.

China decelerated to 7.4 % in 2014 from 6.9 % in 2013. It is expected to grow at 6.8 % in 2015 and 6.3 % in 2016.

India is on a roll with 7.2 % in 2014. It is expected to grow at 7.5 % in 2015 and 2016 surpassing its bigger neighbour China.

During the year 2014, worldwide IT-BPM spends were USD 2.3 trillion, 4.6 % up from 2013. This growth is expected to continue in 2015 as the capital growth in the US augurs well for the IT Services. There will be new demand from US companies having higher discretionary spend at their disposal. Renewed vigor in India and its Digital India program also presents interesting opportunities ahead.

Global sourcing of services grew faster by 10 % and India held on to its leadership position with a 55 % market share. A similar performance by Indian IT companies is expected in 2015.

The Indian IT-BPM industry revenue growth in FY2015-16 is expected to be 12%-14%. In FY2014-15 Indian IT-BPM industry grew by 13 % year-onyear with revenues of USD 146 billion. Exports grew at 12.3 % and clocked USD 98 billion. Domestic segment grew faster due to inclusion of ecommerce and mobile app industry and is expected to touch USD 48 billion in revenues.

Rapid upscaling of capabilities around digital, SMAC and other emerging technologies is enabling IT-BPM firms to expand services to existing customers and also attract new customers. India is also emerging as a powerhouse for digital skill with 1.5 lakh digitally skilled employees, over 7000 firms working on digital solutions and over 2000 digitally focused startups. The impetus on innovations has been like never before with larger firms fostering innovation – collaboration, building scale, co-creating the best solutions.

Industry is attempting to shift from linear to non-linear growth models. One of the primary strategies focuses on product/IP development which is further being supported by the verticalized offerings. Expertise developed in specific verticals is enabling IT-BPM firms to deliver innovative products and services to customers that in turn facilitate entry into new markets, geographies, access to customers, etc.

India is strongly positioned to garner more market share in the global IT-BPM services sourcing market as it is still the world′s most attractive sourcing destination driven by optimum costs, highest volume of diverse employable talent, strong network of GDCs, multi-shore presence and mature ecosystem. It is well set to reach its goal of USD 300 billion revenues by 2020. At the same time, challenges around economic volatility, protectionism, competition and customer centricity will need to be addressed by the concerned stakeholders.

Source: IMF WEO, NASSCOM Strategic Review 2015

Financial Performance

The table below gives an overview of the consolidated financial results for 2014-15 and 2013-14.

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Revenue for the year in USD terms grew by 16.4% to $ 583.81 million. In Rupee terms, revenue for the year is ₹ 35,619 million at a growth rate of 17.5%.

We analyze our revenue based on various parameters. The factors which are driving our revenue growth (in USD terms) are as follows:

  1. Revenue by vertical: Among the verticals, Travel & Hospitality grew by 24.5% in the current year followed by BFSI and Retail, CPG & Manufacturing which grew by 18.8% and 17.2 % respectively.
  2. Revenue by geography: US revenue grew by 24.4% followed by Rest of world revenue which grew by 16%.
  3. Revenue by service offering: Our revenue from package implementation service grew by 129.1% year-on-year, followed by Consulting and Infrastructure management tech support revenues which grew by 45.1% and 25.7% respectively.
  4. Revenue by mix: Our onsite revenue grew by 27.8% in the current year as compared to a growth of 8.8% in offshore revenue.
  5. Client contribution to revenue: Revenue from our top 10 customers grew by 17.4 % in the current year higher than the Mindtree average of 16.4 %.

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

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Our active customers list as at March 31, 2015 stands at 217.

During the year, one of our clients crossed $50 million in revenue. Our clients with over $30 million in revenue increased from 3 to 4 in number and our clients with over $20 million in revenue stands at 6.

Other income (excluding foreign exchange gain)

Other income for the year ended March 31, 2015 is ₹ 656 million and has increased by ₹ 280 million over the previous year (₹ 376 million). This is mainly due to increase in gain on sale of investments and higher interest income during the year.

Foreign exchange loss/ gain

Foreign exchange gain for the year ended March 31, 2015 is ₹ 179 million as compared to a gain of ₹ 120 million in the previous year. The gain is mainly on account of better realization.


Employee benefits expenses

At 58.2% of total revenue, employee benefits expenses are the biggest chunk of expenses. It includes the fixed as well as the variable components of employees′ salaries, contribution to provident funds, gratuity etc. Stock based compensation cost and 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:

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Total employee benefit expenses have increased by 16.4%. In relation to revenues, employee benefits expense has reduced by 0.6% from 58.8% to 58.2%.

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:

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Other expenses, in relation to revenue has increased by 0.7% as compared to last year. Sub-contractor charges have increased by 1.3% and computer consumables by 0.1%, forming the major components for increase. This is offset by decrease in other expenses by 0.6%. The other heads of expenses have shown a marginal increase as compared to last year.

On an overall level, other expenses have grown by 21.6% as compared to last year mainly due to increases in Sub-contractor charges, computer consumables and rates and taxes which have increased by 50.6%, 35.7% and 28.4% respectively.

Profitability and Margins

  • EBITDA margins have dropped marginally from 20.1% to 19.9% in the current year. The decrease is primarily attributable to:
    • Increase in other expenses, as a percentage of revenue by 0.7%.
    • This is offset by decrease in employee benefits expenses, as a percentage of revenue by 0.6%.
  • Our effective tax rate has increased from 22% in the previous year to 22.4% in the current year.
  • PAT has increased from 14.9% to 15.1% in the current year.

Segmental Reporting

The Group′s business are broadly classified under five business segments, RCM, BFSI, HTMS, TH and Others.During the year, the Group has classified results of Media Services in HTMS. The results were previously classified with TH segment. Accordingly, as required by the accounting standards, comparatives have been restated and presented in line with the current segments. The Group considers business segment as the primary segment and geographical segment based on the location of customers as the secondary segment.

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

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Significant changes in Balance Sheet items

  • Increase in reserves and surplus of ₹ 3,299 million is due to:
    • Securities premium account decreased by ₹ 310 million mainly because of ₹ 418 million utilized for issue of bonus shares. This is offset by increase of ₹ 108 million on exercise of employee stock options/ restricted shares.
    • Balance in the statement of profit and loss increased from ₹ 12,072 million to ₹ 15,720 million due to current year profits, which is offset by declaration of dividend (including dividend distribution tax) of ₹ 1,715 million.
  • Other long-term liabilities have increased to ₹ 334 million as compared to ₹ 129 million in the previous year.
  • Other current liabilities have increased by ₹ 727 million mainly because of increase in employee related liabilities ( ₹ 213 million ) , other liabilities ( ₹ 351 million ) and unearned income ( ₹ 125 million )
  • Short term provisions have increased by ₹ 489 million, due to increase in provision for dividend and dividend tax payable (₹ 277 million), provision for discount ( ₹ 136 million ), provision for employee benefits ( ₹ 53 million ) and provision for taxes ( ₹ 20 million ).
  • Additions to fixed assets during the current year is ₹ 1,977 million (previous year ₹ 1,657 million) mainly on account of capitalization of Bhubaneshwar facility ( ₹ 606 million). Also, there are additions in computer systems, computer software and leasehold improvements.
  • 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 ₹ 6,421 million as at March 31, 2014 to ₹ 8,946 million as at March 31, 2015.
  • The Days Sales Outstanding (DSO) as at March 31, 2015 is 67 days as compared to 72 days as at March 31, 2014.
  • Other current assets have decreased by ₹ 106 million mainly due to decrease in prepaid expenses ( ₹ 28 million ), derivative asset ( ₹ 69 million ) and unbilled revenue ( ₹ 32 million ). This is offset by increase in MAT credit entitlement ( ₹ 36 million ).

Strengths & Opportunities


Mindtree was born digital. Currently a third of our revenue is driven by providing digital services. Our company has shown significant strengths in digital service line by enabling its clients to grow their business as well as run it efficiently.

Digital is disrupting businesses and the way business is conducted across every industry. We are right at the epicenter of the "consumer age", spoilt for choices in the products and services we consume. Because of that, we as consumers are forcing every business entity to change - to offer that multitude of choices in a simple, ubiquitous and (most importantly) in a personalized manner. The rapid changes that businesses will face are coming from three main areas: Collaboration, personalization and the shift of power from marketers to consumers. We say "demand now discovers supply" instead of supply meeting demand.

From an IT services industry perspective, Digital business is estimated to touch $ 225 billion by 2020 with $ 48 billion predicted for Indian IT services firms. But the excitement stems from the optimistic view that 90% of all incremental spend in the next five years on IT will be on Digital. Our vision is to "Make Businesses Digital". In order to achieve our vision we have positioned our Digital Business across four broad themes:

  • Creating digital customer experiences / touch points that deliver outcomes
  • Digitizing the value chain across the front and back end
  • Developing "sense-and-respond" systems to make enterprises adaptive with data and insights
  • Shaping new, innovative business models and partnerships

Mindtree has also reorganized its team with a focus on faster time to market and turnkey cloud-based solutions to make Digital real for its customers.

Expert Thinking

Mindtree brings robust skills and forward-looking perspectives to solve customer challenges. Our company uses proven knowledge to make recommendations and provide expert guidance to our customers. Mindtree has been recognized widely in the following areas:

  • Mindtree became the world′s first Bluetooth Smart 4.2 IP provider. Our company has been a leading provider of Bluetooth Intellectual Property solutions over the last 15 years and this qualification is the most recent in its long list of Bluetooth IPs. Bluetooth Smart version 4.2 focuses on stronger security and privacy, faster data rates and better power efficiency. It heralds a new wave of Bluetooth products and will accelerate growth in emerging categories such as wearables, smart homes, connected medical devices and smart location tracking. The upcoming Internet Protocol Support Profile enables seamless connectivity over IPv6, a key foundation layer for the Internet of Things (IoT) market.
  • Mindtree has been named in the overall leader zone by Zinnov, a leading globalization and market expansion advisory firm, in its global R&D service provider ratings 2014. The report is an exhaustive exercise that covers over 50 service companies that offer product engineering, manufacturing engineering and engineering IT services globally. Mindtree is positioned as an established company with matured offerings and wide client acceptance. According to Zinnov, Mindtree is "fast closing the gap by diversifying into newer verticals by leveraging their embedded and software capabilities". The global service provider rating helps end-users understand the service provider landscape and build more intelligent vendor relationships. This recognition shows that our strategic investments in building expertise and IP are paying off and bringing value to our customers.
  • Mindtree is strengthening its relationships with experts who help our clients perform better. Furthering such an association, Mindtree and IGD launched an inaugural e-commerce award to recognize excellence in e-commerce among CPG and Retail enterprises. The winning entries showcased enhancements that have significantly improved the shopping experience of consumers through any online or mobile sales platforms. Specific parameters included:
    • Understanding and influencing consumer behavior
    • Impact on sales and market share
    • Collaborative implementation with trading partners

Alliance and partnerships

Mindtree believes in developing true partnerships. Our company engineers meaningful technology solutions to help not only businesses but also societies to flourish.

  • In order to build strong partnerships and be near the clients to gather their pulse Mindtree has increased its nearshore presence. In order to strengthen the partnership with key clients, Mindtree opened a new US delivery center (USDC) in Redmond, Washington in addition to an existing one at Gainesville, Florida. The state of art facility will focus on building talent and delivering cutting edge solutions in the areas of Cloud, Mobility, Infrastructure Management and Testing. There is an increasing demand from our clients to provide right-sourcing options from a combination of onsite, offshore, or onshore locations. We have already proven, with our right-sourcing approach, that we can deliver superior solutions at lower costs and at a faster pace. USDC-Redmond allows us to further scale the delivery of solutions in the US and help us continue to leverage the best and brightest from the global talent pool.
  • On the business front, Mindtree and SAP announced their first Managed Mobility Offering in Australia. Mindtree will deliver SAP mobile solutions in the cloud and with a pay-by-usage model. Managed mobility services from Mindtree and SAP enable organizations to rapidly mobilize their business with little complexity, minimal set-up time, and zero infrastructure costs. Mindtree will offer an end-to-end suite of services including consulting, installation, hosting, and maintenance for the SAP Work Manager application on the cloud. This solution is designed to:
    • Reduce the deployment time of SAP mobile solutions from months to weeks
    • Improve efficiency and decision making capability of their field workforce by eliminating paper and improving data capture
    • Create a more cost-effective IT infrastructure
    • Mitigate the risk of technology obsolescence
  • Mindtree announced a strategic alliance with Pegasystems Inc. the leader in Business Process Management (BPM), to develop and optimize custom BPM solutions. The solutions are based on Pegasystems′ Build for Change® technology platform. Customers are looking for solutions that leverages BPM platforms across multiple lines of business. Our broad alliance with Pegasystems helps our clients accelerate their efforts to create a more streamlined organization. Mindtree will work with Pegasystems to meet the needs of our clients with better business software and services that enable them to transform their businesses and embrace the power to better engage with customers, simplify operations, and adapt to change. Mindtree′s EAI / BPM center of excellence conceptualizes and incubates key solutions that provide clients with better performance and high quality processes at reduced costs. Mindtree also showcased these solutions at PegaWorld 2014 in June last year.

Customer centricity

Our relentless focus on customer centricity has enabled us to become the partner of choice for our clients. This reflects in growth of our $10 million and $5 million customers. In FY2014-15 our $ 10 million customers grew from 13 to 14. Similarly our $ 5 million customers grew from 24 to 28. One of our clients crossed $50 million in revenue. Our clients with over $30 million in revenue increased from 3 to 4 in number and our clients with over $20 million in revenue stands at 6.

Our annual customer experience survey for the year 2014-15 reflects that our unrelenting dedication has taken us closer to our aspirations. It clearly shows that our clients have again rated us significantly better than last year on Satisfaction, Loyalty and Advocacy. Clients are seeing value for money (VFM) and are more willing to recommend us to peers.

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Source: Mindtree Annual Customer Experience Survey

Mindtree invests in knowing the client and their clients better such that we provide great customer-centric services. Our company recently conducted the "Phy-gital Shopper" survey aimed at unlocking the next wave of growth for retail customers. This survey was carried out globally and gives insights into the shopper′s behavior in specific geographies viz. USA, United Kingdom, Germany, Benelux, etc. The independent study, "Discover the Phy-gital Shopper: A Survey by Mindtree", provides critical insights into the evolution of the "Phy-gital" shopper and the kinds of shopping experiences and features that would encourage them to shop more. These "Phy-gital" shoppers have a world of information at their fingertips and they′re just as comfortable shopping online as they are in a retail store. The study found that these high-expectation shoppers combine online and in-store experiences in whatever way is most convenient or efficient for them. Their behavior has flipped the traditional supply and demand model. With today′s connected shopper, demand now discovers supply. At the hint of a need, this new breed of shopper interacts with various media and devices to find what they want. The paradigm shift is fueled by new technologies such as cloud apps, machine intelligence and connected smart devices. The opportunity is there for retailers to meet these shoppers at the critical moments across all media, devices and channels—and to offer a remarkable experience that makes them stand out in the marketplace.

Leadership and corporate governance

Our senior management comprises of some of the most seasoned global leaders in the industry from diverse backgrounds, geographies and with different areas of specialization in the IT industry. Their leadership and governance helped us deliver consistent performance. Some of the significant recognitions are as follows:

  • Mindtree was rated amongst the top 5 in the Asiamoney Corporate Governance Poll results in various categories such as Overall Corporate Governance, Disclosure and Transparency, Shareholder Rights and Investor relations.
  • Krishnakumar Natarajan, MD & CEO, Mindtree was awarded the Best CEO under the IT/ITES (Mid-sized companies) category at the India′s Best CEO 2014 awards by Business Today-PricewaterhouseCoopers.
  • Rostow Ravanan, CFO, Mindtree, was awarded the Best CFO under the Consistent Liquidity Management (Medium) category by the 5th Business Today- Yes Bank Best CFO Awards 2014.
  • Mindtree was named the winner of the Silver Shield award for Excellence in Financial Reporting by ICAI for the year 2013-14

People focus, learning and high performance culture

Our people continue to be our biggest strength. Therefore, we believe that the expert Mindtree Mind is to be cultivated and cared for in a conscious way in order to be created. The way we approach development of our people is akin to that of a gardener tending to his garden, planting the saplings or replanting the plants and nurturing them by creating the right environment needed for their growth.

Mindtree′s people strategy is to inculcate a high performance and learning culture. The learning is inculcated into young minds through our Orchard programs. Similarly, Arboretum programs are carefully designed as on-boarding platform for experienced talent pool, one lateral hires which acclimatizes them to the new environment, exposing them to the Mindtree culture.

The Pillars Program at Mindtree continues to reward high performers and recognize the contributions of their family. The program aims to nurture and retain star performers, build a robust leadership pipeline and engage with the extended Mindtree family. At Mindtree, recognition is expressed in many ways. Recognition is integral to our culture – we celebrate things big and small – and we strive to find new ways to appreciate one another every day.


The total number of Mindtree Minds as on March 31, 2015 was 14,202 as against 12,926 as on March 31, 2014.

Threats, Risks and Concerns

A summary of Threats, Risks & Concerns is provided below. For a more detailed view of Mindtree′s risk management program, please refer to the Enterprise Risk Management Report.

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Internal control systems and their adequacy

The CEO and CFO certification provided in the CEO and CFO certification section of the annual report discusses the adequacy of our internal control systems and procedures.

Our strategy

The recent past has been characterized by uncertainty and volatility in the world economic markets. Our IT services industry has not been aloof to these changes in macro economic environments. Our company has refreshed and renewed the strategic pillars to harness the potential presented by disruptive technologies, expanding competition and evolving customer requirements. Following are the Mindtree strategic pillars which will enable our company to grow faster and generate higher returns for our stakeholders:

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Our focused approach helped us to deliver an industry leading performance with a revenue growth of 16.4% for FY2014-15. The results validate our decision to transform Mindtree to be a valued, digital partner for our clients. In this, our expertise in agile, analytics, cloud and Internet of Things (IoT) is making a deep impact. Our customer satisfaction levels are at a record three year high. We will continue to focus on delivering superior financial performance, innovation and industry leadership in our chosen verticals. We expect our relationship with our clients to become more strategic for each other. Mindtree is confident of delivering another industry-leading and broad-based growth in FY2015-16.