MindTree's margins merit much minding

Bangalore-based offshore services firm, MindTree, finished its FY (to 31st March) with a creditable 21% headline revenue growth, to $331m. However, operating margins almost halved to 7% as delivery costs and SG&A expenses grew faster than revenues. Indeed it looks like MindTree is in some turmoil on the delivery front, with attrition (averaged over 12 months) exceeding 25%, almost twice that of industry leader TCS (14%). As a result, MindTrees’s headcount was actually 1% lower at year-end, at just over 9,500 FTEs. This will surely present a challenge for MindTree CEO, Krishnakumar Natarajan, who remains “confident” of delivering higher growth than industry association Nasscom’s 16-18% industry-wide projection this year. MindTree derives about 22% of its revenues from Europe, mostly in the UK, where it also partners with 2e2 (see 2e2 applies MindTree minds to SAP services).