Home / Companies / People /  Mindtree appoints new CEO, reports strong third quarter

Bengaluru: Mid-sized outsourcing company Mindtree Ltd on Monday unveiled a broad management shuffle that included the appointment of a new executive chairman and chief executive, and reported a strong 2.3% quarter-on-quarter rise in dollar revenue in a seasonally weak December quarter.

The Bengaluru-based company said chief executive Krishnakumar Natarajan has been elevated to the role of executive chairman, while Rostow Ravanan, head of Mindtree’s Europe business, will assume the role of chief executive. Ravanan was until April the financial chief of Mindtree.

Mindtree’s current executive chairman Subroto Bagchi will step down from the position, but will continue as a non-independent director of the board, the company said in a statement. The changes are effective 1 April. The company didn’t immediately give the details of who will replace Ravanan.

“This is the culmination of a year-long succession planning that the board had undertaken after carefully considering several internal and external candidates," Natarajan told reporters in a conference call. “We believe that Mindtree is fully ready for the opportunities and challenges ahead."

The management changes come a year of ahead of Natarajan’s and Bagchi’s retirement in 2017, when both executives turn 60, and ensure a smooth transition of leadership, analysts said.

“The transition would have been abrupt had these executives retired and a new leadership had taken over in 2017. The one-year period offers them the time to handhold the new CEO through the responsibilities of the role," said Sandeep Muthangi, vice-president for research at IIFL Capital.

In a separate statement, the company said it has agreed to buy US-based consulting service provider Magnet 360 Llc for $50 million in cash to bolster the portfolio of its digital and cloud services business.

“We are now seeing clients starting to invest heavily in digital transformation programmes beyond just building the customer experience layer," said Natarajan. “This acquisition will strengthen our offerings in digitizing the value chain and building sense-and-respond systems."

Mindtree will make an upfront payment of $37 million and will pay the remaining $13 million over the next two years, depending on Magnet 360 meeting certain targets, the company said.

Adjusted for revenue from the businesses it discontinued, Magnet reported revenue of $25 million in 2015.

Mindtree is one of the few medium-sized outsourcing companies that have been actively pursuing acquisitions to build the portfolio of services in the digital business. In June, it bought two companies for $77 million: UK-based Bluefin Solutions for £42.3 million and US-based Relational Solutions Inc. for $10 million.

In the quarter ended December, Mindtree’s revenue grew 2.3% sequentially to $184 million. Its net profit declined 5.9% to $22.8 million.

Mindtree’s performance outpaced larger rivals such as Tata Consultancy Services Ltd, Infosys Ltd and Wipro Ltd which reported at best a less than 1% revenue growth in the quarter.

Net profit fell 4.6% to 151 crore amid a sharp rise in expenses, while revenue grew 3.9% to 1,214.5 crore.

Mindtree’s revenue growth was broad-based, including a robust expansion for the retail, manufacturing, banking, financial services and technology and media segments. The company’s order book in the December quarter was worth $204 million, of which roughly 40% was in the digital business.

The strong revenue growth comes in the backdrop of a muted financial performance by most of the top Indian outsourcing companies in a seasonally weak quarter because of holidays at the end of the year and a flood that inundated Chennai, where most IT companies have their software development centres.

Natarajan said the company faced limited challenges from the calamity in Chennai and exuded confidence in reporting a stronger fourth quarter even as uncertainty prevailed over the pace at which clients closed their technology budgets this year.

“We certainly feel the environment is not negative," Natarajan said. He expects the company to beat the outsourcing industry’s growth expectations in the next fiscal year, which begins in April.

The company also issued one bonus share for each share held by its shareholders.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.
Recommended For You
Edit Profile
Get alerts on WhatsApp
Set Preferences My ReadsFeedbackRedeem a Gift CardLogout