L&T bid may hit Mindtree Q1 numbers as clients defer deals

Bengaluru: Mindtree may see growth slow down in the April-June period as clients defer deals by at least three months seeking stability amid a takeover bid by Larsen & Toubro, two people aware of the matter told ET.The mid-tier IT services company grew 16 per cent in the fourth quarter of the previous fiscal year, touching revenue of $262 million. The Bengaluru-based company posted 4 per cent growth on a sequential basis in constant currency terms.“Multiple large deals for Mindtree may have been pushed by at least a quarter as clients wanted to have clarity on which way the ownership goes and if there are management changes,” said one of the two people.“As a result Q1 (April-June) numbers are unlikely to grow at the same pace,” he said. “There will still be growth, but not at the rate they (Mindtree) were indicating earlier.”Mindtree and L&T did not respond to ET’s queries on Q1growth prospects.Microsoft is Mindtree’s top client, helping the software exporter’s clients migrate to its Azure cloud platform, which is seeing growth. The remaining top 10 clients, however, have deferred spending due to the uncertainty surrounding the IT services firm after the engineering conglomerate’s hostile takeover bid.“We have heard the management saying uncertainty can lead to softness in deal closure,” said an analyst who tracks Mindtree who did not want to be named as he is not authorised to speak to the media.The diversion of the Mindtree management’s attention to thwart L&T’s takeover instead of focusing on clients has also contributed to the softness, one of the two people mentioned above said.Deferred closure of large deals means billing delays will impact the company’s profits, at least for the first quarter of the current fiscal.L&T has acquired over 60 per cent stake in Mindtree and expects to hold 66 per cent in the IT services firm by the time its open offer concludes on June 28.Mindtree CEO Rostow Ravanan told shareholders earlier that the firm expects to grow at around 13 per cent in fiscal 2020. The company said in its annual report that it would expand operating marigns by 100-120 basis points, to 16 per cent.Mindtree’s promoters have said that despite challenges in the current financial year, the company would grow faster than the IT-BPM industry, which saw more than 8 per cent growth in the previous financial year.

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