$1 bn goal: How Mindtree sorted out its problems and emerged stronger
Mid-sized software exporter MindtreeBSE -1.05 % has a simple philosophy to survive in India's competitive $100-billion IT services industry: Get back to the 'basics of doing business'. And, that's what the Bangalore-based company did when profits started to decline and then-chairman Ashok Soota decided to walk out two years ago.
"We cleaned up our act and we did it decisively," says Subroto Bagchi, who co-founded Mindtree with 10 others, including Soota, a former vice-chairman of Wipro.
"By the time we ended FY11 — in which Mindtree's profits had fallen over the previous year — we had a strategy in place: To get back to basics," adds Bagchi.
Mindtree has come a long way since its debut in 1999. Founded by 10 senior IT professionals from companies such as WiproBSE 0.34 % and Cambridge Technology Partners, Mindtree soon received its first round of funding from Walden International and Global Technology Ventures.
During the initial days Bagchi focussed on ferreting out new leaders from within the organisation. In just six years, Mindtree's revenues crossed $100 million and it opted to go for a public listing in 2007.
The timing wasn't the best. A year later, as the mortgage crisis in the US shook the rest of the world, Mindtree, too, took a hit.
The company fell short of its revenue targets and profits plunged. The chairman's objective of hitting revenues of $1 billion became a pipe dream, with Mindtree's revenues between 2008 and 2010 remaining below $300 million.
It was time for some drastic decision-making. In 2009, Mindtree announced it would go beyond its mainstay of software services.
It forayed into designing mobile handsets by acquiring the India R&D centre of Kyocera Wireless. That didn't help.
The acquisition not only failed to bring in revenues, it also resulted in huge restructuring costs.
In 2010, Mindtree announced its exit from the mobile products business; and, a year later, chairman Soota announced his exit. "Setbacks build muscle tone into the organisation and, today, we are better trained than before," says Bagchi.
In 2010-11, profits continued to decline — from a 24% fall in the first quarter to a 41% drop in the fourth quarter over a year ago. But Bagchi says this isn't relevant because Mindtree had begun growing its top line "admirably" at over 20%. The turning point for Mindtree was the acceptance that the reason for the decline in profitability was more internal than external.
By April this year, Bagchi took over as chairman. And, under him, in an effort to do something unique, Mindtree set about cutting down on verticals that weren't delivering and started providing outsourcing services mainly to the manufacturing and banking & financial services sectors.
Bagchi says this helped Mindtree focus on building specialisation in chosen verticals, deep account mining and getting prepared for larger deals. The first glimmers of a comeback appeared in the final quarter of FY12 when Mindtree posted a 115% growth in profits over a year ago.
In the September-ended quarter of the current fiscal year, Mindtree had 247 active clients and, at the end of FY12, it had four $20 million-plus customers from only one at the beginning of this period.
So, can Mindtree grow closer to the $1-billion goal? "If we do the right things the right way, we will get to the billion-dollar league," says Bagchi.
Source : INDU NANDAKUMAR,ET BUREAU
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V G Siddhartha, Coffee Day Group’s chairman who was one of the first venture capitalists to back MindTree Limited more than a decade ago, is once again moving to cement his stake further in this mid-tier software exports company. The 51-year-old entrepreneur on Monday announced that he has acquired 3.84 per cent stake in MindTree for around Rs 95 crore from another early venture fund — Walden International. With this, Siddhartha — along with two of his companies Coffee Day Resorts and Global Technology Ventures — holds little more than 21.5 per cent. The promoter group holds 21.5 per cent.
Siddhartha’s move comes hardly a couple of months after he acquired the 11.8 per cent stake held by Ashok Soota, who quit as chairman of MindTree last year. Prior to that move, Siddhartha held 6.54 per cent in the company.
Siddhartha’s step to buy out Soota’s stake was precipitated after the latter’s sudden exit from MindTree during early 2011 due to various differences among the promoter group. Soota has since started a new software exports firm, Happiest Minds Technologies. For this, he had, in addition to his funding, raised private equity from Intel Capital.
It is understood that Siddhartha has paid out close to Rs 200 crore to effect this transaction. For this, he has raised debt through a non-banking financial company, besides internal resources. Siddhartha has earlier said he would not increase his stake beyond 26 per cent in MindTree.
After a rather rocky 2011, when MindTree revenues and margins were hit, the company for the fourth quarter ended March 31, 2012, posted a 115 per cent growth in net profit at Rs 68.9 crore. The revenues of the company for the same period stood Rs 5,25.7 crore reporting an year-on-year growth of 34.4 per cent. On a full-year basis, the company’s net profit stood at Rs 218.5 crore as against Rs 101.6 crore in 2010-11 registering a growth of 115.1 per cent.
A seasoned entrepreneur who started his career at J M Financial, Siddhartha has 10,000 acres of coffee estates in Chikmagalur of south-central Karnataka, and has expanded his businesses rapidly. His business is valued upwards of $1 billion and ranges from coffee retailing and exports, wealth management, waste management, logistics, furniture, hospitality, granites to SEZ development and food processing.
During 2010, Siddhartha had raised a record $200 million from blue-chip private equity funds KKR, Standard Chartered and New Silk Route in a move to fast expand his bouquet of businesses. Global Technology Ventures has also invested in marquee technology companies, including a chip-design firm Ittiam Software, GlobalEdge Technologies, besides a few others. GTV had a blockbuster exit from its investment in Kshema Technologies when it was sold to MphasiS Software. Bank of America was one of the limited partners in GTV, before being bought out by GTV.
MindTree’s scrip for the 2012 year rose from Rs 390 to 705 per share.
The turning point for Mindtree was the acceptance that the reason for the decline in profitability was more internal than external.
Mid-sized software exporter MindtreeBSE -1.05 % has a simple philosophy to survive in India's competitive $100-billion IT services industry: Get back to the 'basics of doing business'. And, that's what the Bangalore-based company did when profits started to decline and then-chairman Ashok Soota decided to walk out two years ago.
"We cleaned up our act and we did it decisively," says Subroto Bagchi, who co-founded Mindtree with 10 others, including Soota, a former vice-chairman of Wipro.
"By the time we ended FY11 — in which Mindtree's profits had fallen over the previous year — we had a strategy in place: To get back to basics," adds Bagchi.
Mindtree has come a long way since its debut in 1999. Founded by 10 senior IT professionals from companies such as WiproBSE 0.34 % and Cambridge Technology Partners, Mindtree soon received its first round of funding from Walden International and Global Technology Ventures.
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The timing wasn't the best. A year later, as the mortgage crisis in the US shook the rest of the world, Mindtree, too, took a hit.
The company fell short of its revenue targets and profits plunged. The chairman's objective of hitting revenues of $1 billion became a pipe dream, with Mindtree's revenues between 2008 and 2010 remaining below $300 million.
It was time for some drastic decision-making. In 2009, Mindtree announced it would go beyond its mainstay of software services.
It forayed into designing mobile handsets by acquiring the India R&D centre of Kyocera Wireless. That didn't help.
The acquisition not only failed to bring in revenues, it also resulted in huge restructuring costs.
In 2010, Mindtree announced its exit from the mobile products business; and, a year later, chairman Soota announced his exit. "Setbacks build muscle tone into the organisation and, today, we are better trained than before," says Bagchi.
In 2010-11, profits continued to decline — from a 24% fall in the first quarter to a 41% drop in the fourth quarter over a year ago. But Bagchi says this isn't relevant because Mindtree had begun growing its top line "admirably" at over 20%. The turning point for Mindtree was the acceptance that the reason for the decline in profitability was more internal than external.
By April this year, Bagchi took over as chairman. And, under him, in an effort to do something unique, Mindtree set about cutting down on verticals that weren't delivering and started providing outsourcing services mainly to the manufacturing and banking & financial services sectors.
Bagchi says this helped Mindtree focus on building specialisation in chosen verticals, deep account mining and getting prepared for larger deals. The first glimmers of a comeback appeared in the final quarter of FY12 when Mindtree posted a 115% growth in profits over a year ago.
In the September-ended quarter of the current fiscal year, Mindtree had 247 active clients and, at the end of FY12, it had four $20 million-plus customers from only one at the beginning of this period.
So, can Mindtree grow closer to the $1-billion goal? "If we do the right things the right way, we will get to the billion-dollar league," says Bagchi.
Source : INDU NANDAKUMAR,ET BUREAU
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V G Siddhartha hikes stake in MindTree further to 21.56%
V G Siddhartha, Coffee Day Group’s chairman who was one of the first venture capitalists to back MindTree Limited more than a decade ago, is once again moving to cement his stake further in this mid-tier software exports company. The 51-year-old entrepreneur on Monday announced that he has acquired 3.84 per cent stake in MindTree for around Rs 95 crore from another early venture fund — Walden International. With this, Siddhartha — along with two of his companies Coffee Day Resorts and Global Technology Ventures — holds little more than 21.5 per cent. The promoter group holds 21.5 per cent.Siddhartha’s move comes hardly a couple of months after he acquired the 11.8 per cent stake held by Ashok Soota, who quit as chairman of MindTree last year. Prior to that move, Siddhartha held 6.54 per cent in the company.
Siddhartha’s step to buy out Soota’s stake was precipitated after the latter’s sudden exit from MindTree during early 2011 due to various differences among the promoter group. Soota has since started a new software exports firm, Happiest Minds Technologies. For this, he had, in addition to his funding, raised private equity from Intel Capital.
It is understood that Siddhartha has paid out close to Rs 200 crore to effect this transaction. For this, he has raised debt through a non-banking financial company, besides internal resources. Siddhartha has earlier said he would not increase his stake beyond 26 per cent in MindTree.
After a rather rocky 2011, when MindTree revenues and margins were hit, the company for the fourth quarter ended March 31, 2012, posted a 115 per cent growth in net profit at Rs 68.9 crore. The revenues of the company for the same period stood Rs 5,25.7 crore reporting an year-on-year growth of 34.4 per cent. On a full-year basis, the company’s net profit stood at Rs 218.5 crore as against Rs 101.6 crore in 2010-11 registering a growth of 115.1 per cent.
A seasoned entrepreneur who started his career at J M Financial, Siddhartha has 10,000 acres of coffee estates in Chikmagalur of south-central Karnataka, and has expanded his businesses rapidly. His business is valued upwards of $1 billion and ranges from coffee retailing and exports, wealth management, waste management, logistics, furniture, hospitality, granites to SEZ development and food processing.
During 2010, Siddhartha had raised a record $200 million from blue-chip private equity funds KKR, Standard Chartered and New Silk Route in a move to fast expand his bouquet of businesses. Global Technology Ventures has also invested in marquee technology companies, including a chip-design firm Ittiam Software, GlobalEdge Technologies, besides a few others. GTV had a blockbuster exit from its investment in Kshema Technologies when it was sold to MphasiS Software. Bank of America was one of the limited partners in GTV, before being bought out by GTV.
MindTree’s scrip for the 2012 year rose from Rs 390 to 705 per share.
Source : http://www.business-standard.com, http://money.rediff.com
