Not losing sleep over the demand outlook: Mindtree’s Venu Lambu

Mid-size IT company Mindtree has so far seen no signs of slowing demand and is confident to maintain its near-term growth momentum. In a wide-ranging interview, Venu Lambu, Executive Director and Chairman of Global Markets, told DH’s Debasis Mohapatra that he expects deal sizes to increase after it merges with L&T Infotech to form a single entity. Edited excerpts.

How is global demand for IT services changing in the face of recession fears?

First, different models and scenarios are presented by different stakeholders to determine whether or not there will be a recession and how things will develop. I don’t see any significant change in near-term demand. What we said is that we are confident for the first half, we hold it and we are confident to deliver the same level of performance. As things evolve, we will make adjustments over time. But at this point, I’m not losing sleep over it. In the short term, we see no material impact. We are having conversations with customers and realizing that demand from customers themselves has not diminished. This is why we are confident about our growth in the first half.

While the net addition of employees decreased for TCS and HCL, you seem to have maintained it. How?

We launched a very robust first-year program. We are committed to hiring 5,000 freshmen per year. Our attrition remained almost the same and there is a chance to improve it. I hope the industry attrition will decrease and that will help us. Our net addition is part of the plan. When we talked about industry-leading growth at the beginning of this quarter, we had planned for some capacity and it is proceeding according to current plan. I think we will have the same amount of net addition even for the second quarter.

Many IT companies are currently able to negotiate higher prices with their customers. Are these increases sustainable if companies start to face cost pressures due to the slowdown?

Let me put it like this. I don’t see any change in the unique prices. I don’t think anyone is asking for a unique price reduction. But customers are still asking for better productivity, either by revamping delivery models, or by automation, or (by) bringing in AI capabilities in certain areas or even bringing in a better pyramid. Some industries may require us to be more aggressive with automation.

Mindtree’s operating margin improved sequentially over the past quarter, even as some of its larger peers saw declines on this front. Do you think the current operating margin is sustainable?

We have always strived to generate profitable growth and so far we have delivered on that promise. I hope we will continue to move in this direction. Our goal is always to be a profitable and growth-oriented company. As we say, we want to reach 20% EBITDA and we are there.

Tell us about your deal pipeline. How long do you wait to realize income after closing a deal?

Considering that a significant number of transactions are digital in nature, the time it takes to earn revenue from the time we register the order is actually shorter. The time between the order book and the realization of revenue is actually much shorter. This helps us increase our revenue momentum.

Do you expect the size of transactions to be larger after your agreement with L&T Infotech? How do you see the agility of the combined entity after the merger?

Listen, we can’t lose agility because agility is one of the competitive differentiators for any business. As a management team, we will ensure that we do not lose our agility. We are fully aware of this. As we continue to grow, we will maintain agility, flexibility, and transparency. When it comes to trade size, of course, the equation must be one plus one is greater than two. This is our intention. We secured a deal this quarter where Mindtree signed an agreement with one of Europe’s leading travel platform companies, and we partnered with L&T Infotech for some capabilities. We both got together and made the deal at home. It’s a great manual for us and we’ll see how to extend it once the integration is done.

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