MindTree Q4 net drops on higher expenses, lower revenue

MindTree Q4 net drops on higher expenses, lower revenue

Mumbai: Mid-tier IT firm MindTree on Thursday posted a 41% slide in January-March net profit, its fourth consecutive quarterly fall, hurt partly by lower foreign exchange gains, higher expenses and lower revenue.

The Bangalore-based company saw a 17.6% rise in its selling, general and administrative expenses, while foreign exchange gains fell to Rs74 million from Rs165 million a year ago.

A significant ramp down in its business at Kyocera, a key account for the company, also impacted revenue, which rose 1.6% over the previous quarter, chief executive Krishnakumar Natarajan told reporters on a conference call.

Excluding the loss due to Kyocera, MindTree’s revenue rose 4% sequentially, he added.

MindTree, which added 39 new clients during the quarter, saw its quarterly consolidated net profit fall 41% to Rs320 million from Rs544 million a year ago.

A Reuters poll of brokerages had estimated the company to post a profit of Rs320.9, a 41.1% fall from the previous year.

Net sales rose 13.6% to Rs391 crore.

“Our planned entry and exit into the wireless products business also impacted the fourth quarter by $8 million," chief financial officer Rostov Ravanan said.

Last year, MindTree had unexpectedly rolled back its plans of launching a 3G smartphone based on Google’s Android platform in the US.

The company later went through a phase of restructuring as it converted its handets and 4G long term evolution IPR business into a segment for providing research and development services to network infrastructure and handset firms.

MindTree had incurred restructuring costs of $3.7 million during the October-December quarter.

The company’s operating margins fell to 11.3% for the January-March quarter from 11.7% in the previous quarter and 18.4% the year ago.

“There is a huge focus area to develop revenue and margins, but there are short-term challenges like wage hikes between the first and the second quarter," Ravanan said.

The company added 435 people during the quarter and plans to add 4,000 employees during FY12.

During the quarter, the company’s chairman and co-founder, Ashok Soota, resigned with an intention to start his own business venture, weakening investor confidence in the company.

MindTree’s stock has lost 29% of its value over the past three months, four times more than BSE IT index which lost 7.5% in the same period.

Shares of MindTree, which the market values at $348.7 million, closed up 1.3% at Rs391 in a firm Mumbai market.