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 3.1% in 2015 and is projected to reach 3.2% and 3.5% in 2016 and 2017, respectively. This reflects a more gradual pickup than anticipated last year. This may be attributed to a modest and uneven recovery which is expected in advanced economies, slowdown and rebalancing of Chinese economy, lower commodity prices and strains in some large emerging market economies.

US grew at 2.4% in 2015 and is expected to grow at 2.4% and 2.5% in 2016 and 2017, respectively. Overall activity remains resilient in the United States, supported by still-easy financial conditions and strengthening housing and labor markets.

The Euro area grew at 1.6% in 2015 as compared to 0.9% in 2014. It is expected to grow at 1.5% and 1.6% in 2016 and 2017, respectively.

China decelerated to 6.9% in 2015 from 7.3% in 2014. It is expected to grow at 6.5% in 2016 and 6.2% in 2017. India has held on to its high growth at 7.3% in 2015. It is expected to grow at 7.5% in 2016 and 2017 which is higher than its bigger neighbor, China.

As reflected in the economic outlook above, during the year 2015, worldwide IT-BPM spends were flattish at USD2.4 trillion, up 0.4% from 2014.

Unlike the worldwide IT-BPM spend, the global sourcing continues to grow at a healthy rate of 8.5% in 2015. This market is estimated at USD 164 billion in 2015. India held on to its leadership position with a 56% market share.

The Indian IT-BPM industry grew by 8.5% in FY2016 to USD 143 billion in FY2016 (excluding eCommerce), an addition of USD 11 billion.

Exports grew at 10.3% to USD 108 billion in FY2016 from USD 98 billion in FY2015. Demand for SMAC technologies is pushing the need to modernize legacy systems and cloud solutions which is pushing the overall demand of IT-BPM services up.

India continues to be the world’s numero uno outsourcing destination due to its unique value proposition which rests on the following five strategic pillars:

  • Digitally connected domestic economy
  • Maturity in onshore, offshore and nearshore global delivery model
  • Highest volume of diverse, employable talent
  • World’s fastest growing digital hub
  • Digital at the core of innovation

Indian service providers face a significant opportunity as digital technologies continue to be embedded in an ever widening range of products and services. The market is well set to reach USD 200-225 billion by 2020 and USD 350-400 billion by 2025. At the same time, challenges around economic volatility, protectionism, competition and inertia will need to be addressed by the concerned stakeholders.

Source: IMF WEO Jan update, NASSCOM Strategic Review 2016

Financial Performance

The table below gives an overview of the consolidated financial results for 2015-16 and 2014-15.

Financial Performance


Revenue for the year in USD terms grew by 22.5% to USD 715.21 million. In Rupee terms, revenue for the year is ₹ 46,896 million with a growth of 31.7% over previous year.

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

  • Revenue by vertical: Among the verticals, BFSI grew by 28.9% in the current year followed by Technology, Media and Services, which grew by 15.9%.
  • Revenue by geography: US revenue grew by 28.5% followed by Europe revenue which grew by 21.4%.
  • Revenue by service offering: Our revenue from Package implementation grew by 143.3% year on year (mainly because of acquisition of Bluefin), followed by Development and Infrastructure management and tech support which grew by 21.2% and 18.7% respectively. Digital/ SMAC revenue has grown by 37.6%.
  • Revenue by mix: Our onsite revenue grew by 43.3% in the current year as compared to a growth of 5% in offshore revenue.

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

Revenue distribution by geography

Revenue distribution by geography

Revenue distribution by service offering

Revenue distribution by service offering

Revenue distribution by industry

Revenue distribution by industry

Revenue distribution by mix

Revenue distribution by mix

Our active customers list as at March 31, 2016 stands at 348.

During the year, one more of our clients crossed $50 million in revenue, increasing the number of clients with more than $50 million revenue to 2. Our $10 million clients increased from 14 to 15.

Other income (excluding foreign exchange gain)

Other income for the year ended March 31, 2016 is ₹ 412 million and has decreased by an amount of ₹ 244 million over the previous year (₹ 656 million). This is mainly due to decrease in investment income during the year due to reduction in current investments on account of payouts made for acquisitions.

Foreign exchange loss/ gain

Foreign exchange gain for the year ended March 31, 2016 is ₹ 393 million as compared to a gain of ₹ 179 million in the previous year. The gain is mainly on account of rupee depreciating from an average of ₹ 61.01 in FY 14-15 to an average of ₹ 65.55 in FY 15-16.


Employee benefits expense

At 59.8% of total revenue, employee benefits expense 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:

Employee benefits expense

Total employee benefits expense have increased by 35.3%. In relation to revenues, employee benefits expense has increased by 1.7% from 58.1% to 59.8%.

Other expenses

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

Other expenses

Other expenses, in relation to revenue has increased by 0.6% as compared to last year. Sub-contractor charges as a percentage of revenue have increased by 0.4%, communication expenses and computer consumables by 0.2%, forming the major components for increase. This is offset by decrease in rent by 0.2%.

On an overall level, other expenses have increased by 35.2% as compared to last year mainly due to increases in Sub-contractor charges, computer consumables and communication expenses which have increased by 40.2%, 47.6% and 45.4% respectively.

Profitability and Margins

  • EBITDA margins have dropped from 19.9% to 17.7% in the current year. The decrease is primarily attributable to:
    • Lower margin profile of acquired entities
    • Increase in employee benefits expense
  • Our effective tax rate has remained the same at 22.4% when compared to the previous year.
  • PAT has decreased from 15.1% to 12.9% in the current year.

Segmental reporting

The Group’s business are broadly classified under five business segments, Retail, CPG and Manufacturing (RCM), Banking, Financial Services and Insurance (BFSI), Technology, Media and Services (TMS), formerly known as Hitech and Media Services, Travel and Hospitality (TH) and Others. During the year, the Group has classified results of Relational Solutions Inc. (new acquisition) under RCM, Bluefin Solutions Limited and Magnet 360 LLC (new acquisitions) under Others. 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 have also been consistently applied to record income and expenditure in individual segments.

Income and direct expenses in relation to segments are categorized 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

Business Segments

Significant changes in Balance Sheet items

  • Movement in reserves and surplus of ₹ 2,991 million is primarily due to the following:
    • Securities premium account decreased by ₹ 776 million mainly because of ₹ 839 million utilized for issue of bonus shares. This is offset by increase of ₹ 63 million on exercise of employee stock options/ restricted shares.
    • Balance in the statement of profit and loss increased from ₹ 15,720 million to ₹ 19,666 million due to current year profits, which is offset by declaration of dividend (including dividend distribution tax) of ₹ 2,087 million.
  • Other long-term liabilities have increased to ₹ 1,072 million as compared to ₹ 334 million in the previous year mainly due to consideration payable for acquisition of businesses.
  • Other current liabilities have increased by ₹ 1,259 million mainly because of increase in other liabilities (₹ 737 million), dividend payable (₹ 336 million) and Book overdraft (₹ 240 million). Increase in other liabilities is on account of consideration payable for acquisition of businesses.
  • Short term provisions have increased by ₹ 166 million, due to increase in provision for discount (₹ 301 million) and provision for compensated absences (₹ 181 million). This is offset by decrease in dividend and dividend distribution tax by ₹ 402 million.
  • Additions to fixed assets during the current year is ₹ 1,737 million (previous year ₹ 2,209 million) mainly on account of additions in computer systems and buildings.
  • Our cash and investments (net of short term borrowings and book overdraft) have decreased from ₹ 8,946 million as at March 31, 2015 to ₹ 3,618 million as at March 31, 2016, mainly due to acquisition of businesses.
  • The Days Sales Outstanding (DSO) as at March 31, 2016 is 74 days as compared to 67 days as at March 31, 2015.

Strengths & Opportunities

Digital and Automation

Digital continues to be great market opportunity for Mindtree for next several years. Mindtree is eager to contribute to the digital revolution happening around and gain greater market share. Mindtree was born digital. Currently, a third of our revenue is driven by providing digital services and we want to increase it to about 50 per cent in 3-5 years. 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.

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 optimist 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 our customers.

Customers are demanding greater efficiency and productivity to drive down operational costs. Automation and newer approaches to service delivery are becoming key to winning the market share. It is Mindtree’s desire to drive these changes with a human face.

Mindtree is engaging with best in class partners to bring in cutting edge technology which can be leveraged for our clients. We are continuously expanding our automation footprints in our client base in various service lines including application development and maintenance, managed services, testing and quality assurance services, package solution implementation and support services.

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 launched its comprehensive IPv6 Stack and Smart Mesh Suite for Bluetooth Smart. The IPv6 Stack and Smart Mesh Suite will enable original equipment manufacturers (OEM) and semiconductor companies to add seamless cloud connectivity to their IoT products. The combination of IPv6 and Smart Mesh technology not only transmits data collected from remote sensor nodes to cloud analytics platforms, but also enables control of end devices over the internet. IPv6 enables internet access to millions of individual Bluetooth Smart devices, providing the essential IP infrastructure for applications such as smart homes, wearables, and connected medical devices. The Smart Mesh technology helps overcome range limitations in Bluetooth Smart, an important consideration for industrial and home automation.
  • Leveraging its expertise in Retail and CPG industry, Mindtree launched its Flooresense platform to increase in store conversions for retailers. The solution will enable retailers to enhance customer experience and improve the productivity of store associates. Similarly for Insurance industry, the Company launched its Loss Control Platform, a cloud based solution for transforming the underwriting and risk assessment process for insurers and risk management companies. The solution will enable insurance companies to reduce business exposure due to more optimized risk selection and lower claim incidences. The Loss Control Platform is designed for the end-to-end life cycle of loss inspection and control. This comprehensive solution covers request management, assignment, risk assessment, tracking and publishing. It enables seamless collaboration among risk managers, risk engineers, underwriters, claims handlers, customers and other stakeholders.
  • Mindtree has been featured in the overall leadership zone by Zinnov, a prominent globalization and market expansion advisory firm, in its recently released “Global Service Provider Report 2015”. Mindtree has established its expertise in this space through a solid innovative culture, mature offerings and industry specialization. Investments in short range wireless technology, engineering development labs and unique client engagement models, have also contributed to the strong rating. Mindtree’s expertise has been recognized across industries including semiconductor, consumer electronics, enterprise software, telecommunications and automotive. For the first time, the service provider ratings included embedded engineering as a separate category and Mindtree has been featured in the leadership quadrant. This reflects Mindtree’s ability to innovate and come up with differentiated offerings from concept to go-to-market.

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.

  • Mindtree has joined Apigee’s Digital Partner Program to strengthen its API first solution approach. This collaboration with Apigee, a leading provider of application program interface (API) management software, enables Mindtree clients to transform their digital user experience quickly and seamlessly. The Apigee – Mindtree collaboration will provide clients an approach that uses APIs to transform their user experience with agility while still connecting with their legacy, back-end data. This will allow clients to manage their transformation at two speeds – one, a rapid deployment of a new customer interface, and a second, slower transition of legacy systems, which are historically more embedded, and as a result, more time-consuming to update. As an Apigee Digital Partner Program member, Mindtree combines Apigee products with its technology expertise and services to design and implement digital solutions. This partnership with Apigee will allow Mindtree to enhance its industry-leading approach to digital transformation.
  • Magnet 360 has been a Salesforce partner since 2004. Magnet 360, with its Platinum partnership with Salesforce, brings strong expertise across Salesforce Sales, Service and Marketing Cloud implementations. Magnet 360 works with some of the world’s largest companies across the full suite of Salesforce solutions such as CRM, branded sites and communities, social campaign strategy and management, and marketing automation. This strengthens Mindtree’s ongoing focus on delivering customer success by helping clients digitize their entire back-end value chains.
  • Bluefin Solutions (‘Bluefin’) is a market leader specializing in SAP HANA solutions. Its partnership with SAP has helped Bluefin set an awardwinning track record helping businesses manage digital transformations across the entire SAP portfolio. Headquartered in the UK, Bluefin delivers solutions to some of the world´s most prestigious companies and has earned multiple awards including the SAP Pinnacle Award, SAP HANA Partner of the Year, SAP CRM Partner of the Year and SAP BI Partner of the Year. Bluefin offers one of the industry’s most highly regarded team of experts for transitioning to SAP HANA, digital and real-time-analytics. This partnership will accelerate Mindtree’s ability to help its SAP clients digitize the value chain, ensuring there is harmony between the front-end customer experience and back-end systems as businesses transition to fully digital organizations. The partnership also creates an opportunity to expedite Bluefin’s HANA expertise to the US market by leveraging Mindtree’s broad presence.
  • Startups and Innovation are becoming synonymous today. Customers expect us to bring not only Mindtree’s collective expertise and experience, but all the innovation in the startup ecosystem to deal with the challenges faced and seek newer business opportunities. We see working in an intense manner with the startup ecosystem being critical to deliver on this. Mindtree will strive to create unique partnership model for us to work with the startups in the field of artificial intelligence, machine learning, automation, predictive analytics, etc. Mindtree has begun seeing results in these fields especially in areas related to automation.

Customer centricity

Our relentless focus on customer centricity has enabled us to become partner of choice to our clients. This reflects in growth of our $50 million, $10 million and $5 million customers. In FY2015-16, we have added another one $50 million client, increasing the count to 2 and our $25 million clients stand at 6. Our $10 million customers grew from 14 to 15, during the year and our $5 million customers grew from 28 to 31.

Our annual customer experience survey reflects our commitment to develop deep and engaging relationships with our customers. It clearly shows that our clients have cited our relationships with them, our willingness to go the extra mile and our effectiveness in cost and quality as key differentiators than the industry. While our customer satisfaction scores have dipped a little compared to last year we are committed to improving our customer experience and working to improve our customer satisfaction scores. We strive to get better than what we are today by continually engaging with our customers and third party service providers who help us reflect our customer experience.

Customer centricity

Mindtree is proactive in understanding the customers’ needs so as to provide pertinent amicable solutions. A recent study by Mindtree confirmed that among 2,300 global consumers who use online banking or insurance products, 42% are concerned with online payment and fraud, 37% are concerned with privacy and security, and 31% dislike having a less human experience. These all are significantly higher than responses when customers were asked about these issues in the retail, entertainment and travel industries. Mobile payments poised to reach a tipping point, banking and insurance have truly grown into the digital age. The finance industries and their customers have been slower to fully adopt digital technology, and for understandable reasons. Fears about digital privacy and security are natural for individuals engaging in any type of e-commerce, but these concerns are heightened when dealing with personal finances compared to just buying clothes or booking a hotel. Digital focus helps Mindtree to leverage these trends, take ideas to real life, co-create, collaborate with customers and serve customers’ customer better.

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 superior performance. Some of the significant recognitions are as follows:

  • Krishnakumar Natarajan (KK), Mindtree’s outgoing CEO and MD, has been awarded Ernst & Young’s Entrepreneur of the Year award in the Services category for the year 2015. The award salutes the ingenuity of exemplary thinkers, individuals who hold the power to transform. KK was also included among India’s Top 100 CEOs in an annual study conducted by Business Today and PwC early this year.
  • Mindtree awarded as the first runner up for Best Presented Annual Report for 2013-14, under the category of Communication and Information Technology sector by SAFA (South Asian Federation of Accountants) in January 2016.
  • Mindtree won the “Best Corporate” in Technology sector within Asia. This award was announced by the Ethical Boardroom Corporation. The award recognizes the outstanding leadership from boards of public companies who have raised the bar to ensure that strong corporate governance plays an essential part in protecting and enhancing long-term value for all stakeholders.

People focus, learning and high performance culture

Making Mindtree a Great Place to Work

In our pursuit to transform Mindtree into a Great Place to work, we are bolstering our culture of partnering with Mindtree Minds in creating a congenial work environment. As part of Mindtree’s people experience survey, MiVoice, we are embracing initiatives on the four identified themes (Care for a fellow Mindtree Mind, Bottom-Up Communication, Career Growth & Learning and Visibility and Recognition) from the MiVoice Survey. The online platform ‘i belong’ is created to provide an opportunity for Mindtree Minds to come forth and be part of the change. With these initiatives, we have ensured to list transforming Mindtree into a Great Place to Work among our key strategic goals for 2015-16.

Building Leadership Pipeline at all Levels

Mindtree always valued the importance of creating the talent pool by exploring and creating different avenues to nurture the leadership skills. We have embarked upon key learning journeys to upskill 50 leaders at an enterprise level, 100 women leaders and 50 leaders at an emerging leadership level. Building the leadership pipeline runs across the levels of the organization.

At Mindtree, a leader at the organization level is one who is agile in learning, self-aware and exhibits strengths in a few chosen areas. While nurturing talent, we also ensure to balance our talent pool by recruiting the right talent from the market. This enables to create a diverse pool of great talent.

Performance Management

Embracing “performance curve”, giving away “bell curve” was a big step for Mindtree. To nurture and encourage all our Mindtree Minds and to exhibit their best performance, we use a system based on the power law distribution method, called the “long-tail” method, which is gaining ground globally. This method aims to identify hyper-high performers, high performers, and potential high performers and so on till it reaches the tail end, or low performers. Our attempts to build the leadership pipeline is aligned with identifying these Hi-Po minds using individual performance focused approach.


The total number of Mindtree Minds as at March 31, 2016 was 16,623 as against 14,202 as at March 31, 2015.

Threats, Risks and Concerns

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

Threats, Risks and Concerns 1
Threats, Risks and Concerns 2
Threats, Risks and Concerns 3

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. The Auditors have also independently audited the internal financial controls over financial reporting as of March 31, 2016 and have opined that we have adequate internal controls over financial reporting and such controls were operating effectively.

Our strategy

Our overall strategy of achieving industry leading growth through deep domain expertise in our chosen verticals combined with technology depth, customized for our clients remain the same.

An enviable client list and a fantastic leadership team are two clear advantage areas for Mindtree and we intend to leverage them to engineer meaningful technology solutions to help businesses and societies flourish.

Following are the Mindtree strategic pillars which will enable our company to grow faster and generate higher returns to our stakeholders:

Our strategy


Our focused approach helped us to deliver an industry leading performance with a revenue growth of 22.5% (in USD terms) for FY2015-16. The results validate our decision to transform Mindtree to be a valued, digital partner for our clients. In this, our expertise in Agile, DevOps, Analytics, Cloud and Internet of Things (IoT) is making a deep impact. 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 FY2016-17.

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