Mindtree’s top client comes to the rescue as covid hits key vertical

In an replace to the inventory exchanges final month, Mindtree had warned that income in the June quarter might decline in excessive single-digits, due to the opposed affect of the pandemic on the journey, transport and hospitality enterprise section.

As it seems, the affect on this section was far better than Street estimates.

Revenue in the journey, transport and hospitality section greater than halved final quarter.

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The income deceleration in journey, transport and hospitality section was partly offset by the communication, media and expertise vertical. Dollar income on this section grew 9% sequentially, producing greater than half, or 51% of Mindtree’s income in Q1 FY21.

“We imagine demand for collaboration platforms (Microsoft Teams and so forth) owing to work-from-home might have led to a steep surge in the firm’s top account,” mentioned an analyst, on the situation of anonymity. The fear is that this could possibly be a one-off. Besides, revenues from different massive clients in the top 10 bucket fell 12% sequentially.

The income share of the top client grew from lower than 25% in March to greater than 30% in the June quarter. In the backdrop of the massive hit on one massive enterprise section final quarter, the elevated reliance on one massive buyer and the communications vertical is wanting lopsided.

According to the firm, bulk of the hit to income was seen in the June quarter. But outlook for the journey and hospitality vertical stays hazy with feeble indicators of enchancment in the close to future.

Encouragingly, Mindtree continues to see respectable traction in the communication, media and expertise vertical. The decision-making course of is taking longer, however the general pipeline is wholesome, the administration mentioned. Total order wins of $391 million, roughly related to the $393 million in the March quarter, are wholesome. In a post-results interplay, the administration alluded to sustained deal with nurturing and rising the top, and the subsequent set of shoppers, via deeper engagements and cross-selling of providers.

On the optimistic facet, the administration expects general income to develop this quarter (Q2 FY21) in contrast to the earlier quarter.

Also, it expects a lot of the margin features it noticed in the final quarter to maintain as most of the enchancment was pushed by the working effectivity measures launched beforehand.

But given the huge hit to revenues final quarter, traders would do effectively to train warning going forward, particularly since Mindtree shares are down solely 7% in contrast to their highs earlier in the 12 months.