16 January 2019
3QFY19 Results Update | Sector: Technology
MindTree
Buy
BSE SENSEX
36,321
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
10,890
MTCL IN
Signs of de-risking dependency on top client
168
3Q revenue and business momentum:
MTCL’s 3QFY19 revenue grew 2.4%
138.2 / 1.9
QoQ in constant currency (18.6% YoY CC), in line with our estimate of +2.6%
1182 / 616
QoQ. EBITDA margin expanded 50bp QoQ to 15.9%, marginally higher than
-4/-13/31
1753
our estimate of 15.4%. PAT was down 7.3% QoQ to INR1,912m, as against
86.7
our estimate of a 28% QoQ decline, primarily due to lower ETR (14% v/s our
CMP: INR842
TP: INR1,000(+19%)
Financials & Valuations (INR b)
2018 2019E
Y/E Mar
Net Sales
70.4
80.9
EBITDA
10.8
12.6
PAT
7.6
8.7
EPS (INR)
47.3
53.0
Gr. (%)
37.7
11.9
BV/Sh (INR)
195.0
226.3
RoE (%)
25.5
25.1
RoCE (%)
30.7
31.5
P/E (x)
17.8
15.9
P/BV (x)
4.3
3.7
2020E
91.1
14.3
10.3
62.4
17.9
263.3
25.5
31.4
13.5
3.2
Estimate change
TP change
Rating change
estimate of 26.5%, adjusting for which, PAT was INR1722m) triggered by the
reversal of INR190m under the Scheme of Amalgamation post Magnet360’s
merger into the company. For 9MFY19, revenue grew 19.7% YoY CC, while
EBITDA/PAT increased 55.3%/68% YoY.
4Q outlook hints at a strong exit:
MTCL cited that it expects 4Q revenue
growth to come in marginally better than that in 3Q. A 3% QoQ CC revenue
growth would imply YoY CC growth of 17% and FY19 CC growth of 19%. It
expects margins to be comparable to that in 3Q.
Retail/CPG/Manufacturing back after 2Q blip:
3QFY19 growth was led by
Retail/CPG/Manufacturing (+4.9% QoQ) after it dragged the 2Q performance
with a 4.2% QoQ decline. BFSI was soft (-1.1% QoQ) due to weakness in one
client and 3Q seasonality. Growth is expected to return in BFSI in 4Q, led by
a deal with an insurance provider in the Middle East. Top 2-5 clients grew
3.6% QoQ, while top 6-10 declined 4.4% QoQ as one BFSI client slipped out
of top 10.
Valuation view:
Our revenue estimates for FY20/21 are up by 1.5%/1.3% on
the back of the stronger-than-anticipated exit outlook and the improved
confidence in growth compared to the last quarter. We are modeling only
marginal expansion in the EBITDA margin (+40bp over FY19-21), given the
pressures called out by industry leaders on US talent supply. Consequently,
our EPS estimates are little changed after 3Q. Post some disconcerting
commentary on demand after the 2Q miss, MTCL’s 3Q revenue, 4Q outlook
and growth commentary provide some reprieve. The stock trades at
16x/13.5x FY20/21E. Our TP of INR1,000 discounts forward earnings by 16x.
Maintain
Buy.
4Q
226
5.5
14,640
11.1
36.5
20.4
2,355
16.1
13.1
464
28.7
1,695
52.1
74.4
11.1
17,723
73.8
12.5
56.8
1Q
242
6.8
16,395
27.1
36.6
22.5
2,310
14.1
11.5
279
26.8
1,582
-6.7
70.0
9.6
18,990
75.4
12.2
56.4
FY19E
2Q
3Q
246
252
2.0
2.1
17,554
17,872
31.8
29.7
36.4
37.7
21.0
21.8
2,699
2,833
15.4
15.9
13.1
13.6
524
-200
26.8
22.5
2,063
1,722
30.4
-16.5
102.8
54.5
12.6
11.6
19,402
19,908
74.5
74.6
13.0
56.1
FY18
4Q
259
2.8
18,619
27.2
37.7
21.8
2,962
15.9
13.7
480
26.5
2,228
29.4
31.4
13.5
20,488
73.5
847
8.6
54,628
4.3
34.8
21.2
7,405
13.6
10.1
1,208
29.3
4,758
13.7
34.4
17,723
73.3
FY19E
998
17.8
70,440
28.9
37.1
21.8
10,804
15.3
13.0
1,083
25.8
7,595
59.6
47.3
20,488
74.5
(INR Million)
Est. Var. (% /
2QFY19
bp)
251
0.0
2.1
1bp
18,157
-1.6
31.8 -207bp
36.7
95bp
21.3
51bp
2,797
1.3
15.4
45bp
13.2
39bp
-363
-45.0
26.5
1,490
15.6
-27.8 1126bp
9.2 4525bp
9.1
20,022
-0.6
135bp
73.3
Quarterly Performance
Y/E March
Revenue (USD m)
QoQ (%)
Revenue (INR m)
YoY (%)
GPM (%)
SGA (%)
EBITDA
EBITDA Margin (%)
EBIT Ma rgi n (%)
Othe r i ncome
ETR (%)
Adj. PAT
QoQ (%)
YoY (%)
EPS (INR)
Headcount
Uti l i ncl . tra i ne e s (%)
Attri ti on (%)
Fi xe d Pri ce (%)
1Q
200
2.3
12,895
-2.9
34.9
23.8
1,435
11.1
7.3
368
28.6
931
-4.2
-24.6
7.2
16,561
73.2
14.0
52.9
FY18
2Q
3Q
206
214
3.0
3.9
13,316
13,777
2.8
6.4
35.1
32.4
20.8
20.0
1,541
2,074
11.6
15.1
8.0
11.7
368
8
28.9
31.1
1,017
1,115
9.6
9.3
7.3
8.1
7.4
8.6
16,910
17,200
73.2
72.8
13.0
12.6
55.5
56.4
Ashish Chopra – Research Analyst
(Ashish.Chopra@MotilalOswal.com); +9122 61291530
Anmol Garg – Research Analyst
(Anmol.Garg@motilaloswal.com); +91 22 6129 1574
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
MindTree
P&L highlights
MTCL’s revenues grew 2.1% QoQ to USD252m, in line with our estimate
Volume grew strongly by 21.7% YoY, although it declined sequentially by 1.1%
due to seasonal furloughs and client-specific issues in BFSI. This meant that
realization increase by 3.2% QoQ.
In CC terms, revenue growth stood at 2.4% QoQ, as against expectations of
+2.6% QoQ.
Exhibit 1: Revenue in-line; slower growth triggered by client-specific issues
Revenue (USD m)
8.1
4.4
0.5
0.1
2.3
5.7
2.1
-3.0
-0.4
1.8
QoQ Growth (%)
2.3
3.0
3.9
5.5
6.8
2.0
2.1
Source: MOSL, Company
Exhibit 2: YoY growth cooling off on a high base
22.7% 24.8%
32.3%
28.5%
Revenue (USDm)
Growth (YoY, %)
15.6%
20.7% 19.5%
17.3%
7.0% 4.2%
0.0% 0.6%
6.8%
11.5%
180.3 184.4 195.6 199.0 193.0 192.2 195.6 200.1 206.2 214.3 226.2 241.5 246.4 251.5
Source: MOSL, Company
Increasing Digital portion in deal wins
Deal wins during the quarter were USD256m – lower than the USD271m in the
previous quarter. YoY basis, this signifies growth of 5% YoY.
Renewals formed a majority of this number (USD184m). New deals TCV of
USD72m remained low.
TCV of Digital deals was 53% of the total at USD136m.
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Profitability: EBITDA margin expanded 50bp QoQ
EBITDA margin expanded 50bp QoQ to 15.9%, 50bp above our estimate of
15.4%.
PAT declined by 7.3% QoQ to INR1,912m, against our expectation of -28% QoQ
decline. This was primarily due to lower ETR (14% v/s our estimate of 26.5%)
triggered by the reversal of INR190m under the Scheme of Amalgamation of the
company’s wholly owned subsidiaries.
Exhibit 3: Margins have improved over 9M both including and excluding currency benefit
EBITDA margin (%)
21.8 21.8 21.7
SGA (%)
24.0 22.8 22.6
23.8
22.5 21.0 21.8
21.3 22.3 21.7 20.7 19.8
20.8 20.0 20.4
19.8 20.5 19.5 17.1 18.5 17.7 16.7 14.7 12.5 13.4 14.2 11.1 11.6 15.1 16.1 14.1 15.4 15.9
Source: MOSL, Company
Exhibit 4: Utilization at all-time high
Incl. Trainees (%)
79.0
75.5
72.0
68.5
65.0
74.6
Utilization
Excl. Trainees (%)
76.4
Source: MOSL, Company
Exhibit 5: Muted growth in BFSI continues; fully offset by other verticals
Verticals
Technology, Media and Services
BFSI
Retail, CPG & Manufacturing
Travel & Hospitality
Contr to Rev. Growth - QoQ
(%)
(%)
39.4
2.3
21.7
-1.1
22.3
4.9
16.7
2.1
Contr to incr.
rev (%)
44.2
-12.1
51.2
16.7
4 Qrtr CQGR
6.0
0.7
2.9
6.4
Source: MOSL, Company
Operational /segmental highlights
Growth during the quarter was driven by Retail and CPG (4.9% QoQ), HiTech
(2.3% QoQ) and Travel and Hospitality (2% QoQ). This was offset by a decline in
BFSI (-1.1% QoQ).
Top client remained stagnant during the quarter (+1 % QoQ), while top 2-5
clients grew (+3.6% QoQ). However, weakness was seen in the top 6-10 clients
with a 4.4% QoQ decline.
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In terms of Services, growth was seen in ADM (1.9% QoQ), IP (2.1% QoQ),
Package Implementation (4.4% QoQ) and consulting (5.4% QoQ). On the other
hand, a decline was seen in Independent Testing (-0.3% QoQ).
Digital grew by 5% QoQ and 32% YoY.
Exhibit 6: Growth seen in IMS and Package implementation
Services
ADM
Consulting
Package Implementation
IP Led Revenue
Independent Testing
Infra management and Tech Support
Contr to Rev. Growth - QoQ
(%)
(%)
50.7
1.9
3.4
5.4
10.6
4.4
0.6
2.1
13.1
-0.3
21.6
2.1
Contr to incr.
rev (%)
48.2
8.4
19.6
0.8
-1.8
24.6
4 Qrtr CQGR
4.2
3.4
0.4
-8.0
2.8
3.8
Source: MOSL, Company
Exhibit 7: US growth below company average
Geographies
US
Europe
India
RoW
Contr to Rev. Growth - QoQ
(%)
(%)
72.7
1.8
20.1
2.1
3.1
11.3
4.2
-2.6
Contr to incr.
rev (%)
67.0
19.7
19.0
-5.7
4 Qrtr CQGR
5.4
1.2
7.2
-5.6
Source: MOSL, Company
Takeaways from management commentary
Growth momentum in FY20/budgets:
Don’t have a fully clear picture on all
clients’ budget. More clarity will emerge by April. Looks like the theme of
transforming the core should continue. So deal sizes in Digital continue to inch
up. Pipeline is getting stronger, while MTCL’s win rates remain stable. Also, with
Digital transformation moving to the core, deal sizes continue to get bigger and
deal durations longer.
Top-customer:
No concerns in the top account. All the efforts behind growing
other accounts are also paying off. Top customer runs at the highest CSAT score.
Don’t see any immediate glass ceilings hitting that segment. Size does not
present a risk just yet.
Retail deal delays of 2Q:
The large deal that got delayed has not yet come
through. However, other business in the segment has helped drive the turn in
growth after a weak 2Q.
Supply:
Don’t expect a sudden spike or an abnormal cycle of wage hikes for
employees at onsite. MTCL is monitoring the situation on that very closely right
now. The sub-contractor costs have remained within a band, thanks to
continued investments in near shore centers and campus recruitment over the
past few years.
BFS:
This year has been marred by one large customer ramp-down, and
relatively muted trend on CTB spending by MTCL’s portfolio of customers. 4Q
will grow on the back of a deal announced, but it remains hard to take a long
term call. BFSI should do better in FY20.
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Competition:
Not seeing pricing pressure from customers. Value proposition
remains strong, and hence, customers are not wanting to drop prices. Margin
challenges are internal to Mindtree.
On media attention around stake sale:
Emphatically re-iterated no change in
the management approach, which intends to stay fully invested.
Change in estimates
Our revenue estimates for FY20/21 are up 1.5%/1.3%, on the back of stronger-
than-anticipated exit outlook; and an improved confidence in growth compared
to last quarter.
We note that MTCL’s implied growth on exit run-rate in FY18 was 6.8%, which
should be ~4% in FY19. Also, on a 6.8% exit, the company grew 8.2% QoQ CC in
1Q, and the combination has fed into ~19% YoY CC revenue growth in FY19E.
Adjusting for lower implied growth by exit, and a not-so-spectacular 1QFY20E,
our growth estimate for FY20E USD revenue is 12.5% (13% CC).
We are modeling only marginal expansion in EBITDA margins: 40bp over FY19-
21, cognizant of the pressures called out by industry leaders on US talent supply.
Consequently, our EPS estimates are little changed after 3Q.
Exhibit 8: Change in estimates
INR/USD
USD Revenue (m)
USD Rev growth (%)
EBITDA Margin (%)
EBIT Margin (%)
EPS (INR)
FY19E
70.6
998
17.8
15.3
13.0
47.3
Revised
FY20E
72.0
1,123
12.5
15.6
13.5
53.0
FY21E
72.0
1,266
12.7
15.7
13.9
62.4
FY19E
70.9
994
17.4
15.2
12.9
44.5
Earlier
FY20E
72.0
1,106
11.3
15.3
13.2
51.4
FY21E
72.0
1,249
12.9
16.2
14.4
64.0
FY19E
-0.4%
0.4%
49bp
13bp
12bp
6.5%
Change
FY20E
0.0%
1.5%
121bp
32bp
33bp
2.9%
FY21E
0.0%
1.3%
-19bp
-49bp
-50bp
-2.4%
Source: Company, MOSL
Valuation and view
MTCL is a focused mid-tier company. It is a play on select verticals (BFSI, Retail,
Travel, Hi-Tech) and services (Digital, IMS, ADM). Its pragmatic strategy has been
backed by strong execution, which has helped the company grow above
industry in its IT Services business. Its overall revenue has grown at a CAGR of
14% over the last five years.
The company remains actively focused on Digital, which continues growing
ahead of company average. Proportion of Digital in overall revenue at 49.5% is
the highest amongst peers. MTCL has been investing to bolster its early-mover
advantage in Digital through four acquisitions over FY15-16 around P&C
Insurance, SAP HANA, CPG analytics, and Salesforce.
MTCL has had to grapple with issues around their integration, the flip side of
such a strategy. Both Bluefin and Magnet360 have been under pressure since
acquisition. The subsidiaries together had revenue rate of USD71m at the time
of acquisition, and saw a low of ~USD55m. These are now seeing better days as
deal wins boost performance. Margin improvement here, however, remains a
lever for overall profitability.
In addition to this, issues in select top accounts hade led to sluggish organic
growth in FY17 (7.5%). At its lowest, towards the end of FY17, revenue from
MTCL’s top 2-5 customers was down 21% YoY and that from its top 6-10
5
16 January 2019
 Motilal Oswal Financial Services
MindTree
customers was down by 14% YoY. However, these headwinds are behind with all
problem accounts either bottoming out or back on the growth trajectory.
Strength in the top account currently clocking ~50% YoY growth (9MFY19),
combined with multiple other growth accounts, has been driving momentum.
With stability in top clients and Digital becoming mainstream, we expect
revenue growth to hit 19% on an organic basis in FY19 (CC), but taper off on a
high basis to 13% CAGR over FY19-21E. Coupled with this, resurrection of
profitability imply strong earnings growth in the foreseeable future.
On the back of some disconcerting commentary on demand after 2Q miss,
MTCL’s 3QFY19 revenues, 4Q outlook and growth commentary comes are some
reprieve. The stock trades at 16x/13.5x FY20/21E. Our price target of INR1,000
discounts forward earnings by 16x. Maintain
Buy.
Key triggers
Continued uptick in profitability
Steady increase in revenue contribution from Digital
Strength across key accounts
Key risk factors
Peaking out of top customer
Weakness in acquired entities
Pricing decline in traditional deals renewal
Exhibit 9: 1-year forward P/E band
34.0
26.0
18.0
10.0
2.0
P/E (x)
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
Exhibit 10: 1-year forward P/B band
6.8
4.8
P/B (x)
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
27.6
20.5
14.1
4.0
7.7
4.3
3.1
2.8
0.8
5.6
16.9
3.9
1.9
1.2
Source: Company, MOSL
Source: Company, MOSL
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Story in charts
Exhibit 11: Digital 53% of total deal wins
Deal Wins (USDm)
281
207.9 204
193
152 164
220
183
314
209
262
244
298 306
271 256
Exhibit 12: …Which has exhibited strong growth
Digital Revenues
In USD m
48 48 50
42 43 44 45
39 40 40 39 40
33 32 35 37 36
207
Source: Company, MOSL
Source: Company, MOSL
Exhibit 13: Deal wins have consistently bettered revenue
370
320
270
220
170
120
Deal Wins (USDm)
Revenue (USDm)
Exhibit 14: Efforts proportion at onsite has increased steadily…
Efforts mix (%)
Onsite
Offshore
88.3
88.5
87.2
85.7
83.7
82.2
79.5
76.5
77.1
11.7
11.5
12.8
14.3
16.3
17.8
20.5
23.5
22.9
Source: Company, MOSL
Source: Company, MOSL
Exhibit 15: …Putting margins under pressure…
EBITDA margin (%)
SGA (%)
Exhibit 16: …Which should reverse given the multiple levers
Incl. Trainees (%)
79.0
75.5
72.0
68.5
65.0
Utilization
Excl. Trainees (%)
Source: Company, MOSL
Source: Company, MOSL
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Operating metrics
Exhibit 17: Operating Metrics
2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19
Geographic Mix - %
US
Europe
India
APAC
Service Line Mix - %
ADM
Consulting
Package Implementation
IP Led Revenue
Independent Testing
Infra management and Tech Support
Vertical Mix - %
Retail, CPG & Manufacturing
BFSI
Travel & Hospitality
Hitech & Media
Project Type - %
FPP
T&M
Efforts Mix - %
Onsite
Offshore
Revenue mix - %
Onsite
Offshore
Utilization - %
Including Trainees
Excluding Trainees
Client Metrics
No. Of Active Clients
New Clients added
Client Buckets
USD1m clients
USD5m clients
USD10m clients
USD20m clients
USD30m clients
USD50m clients
Client Contribution - %
Top client
Top 5
Top 10
67.6
21.4
3.5
7.5
68.7
20.8
3.1
7.4
69.8
20.8
2.8
6.6
69.6
21.1
3.0
6.3
51.2
3.4
11.5
1.1
11.8
21
24.2
24.7
14.4
36.7
50.6
49.4
23.3
76.7
59.2
40.8
71.4
73.1
337
18
107
30
16
6
0
2
14.4
30.0
42.5
24.1
24.1
15.1
36.7
52.5
47.5
23.5
76.5
60.2
39.8
71.3
72.3
348
21
106
30
17
4
0
2
14.1
30.1
42.3
23.0
24.7
14.9
37.5
52.8
47.2
22.4
75.6
60.5
39.5
70.9
72.7
328
20
111
30
16
4
0
3
14.3
30.7
41.9
22.7
25.1
14.3
37.9
52.9
47.1
23.2
76.8
58.0
42.0
73.2
73.8
336
20
113
33
16
3
0
1
15.3
30.1
41.5
22.9
24.8
14.5
37.8
55.5
44.5
22.8
77.2
57.6
42.4
73.2
74.6
327
24
114
38
16
3
0
1
16.1
30.1
41.9
23.3
24.8
15.3
36.6
56.4
43.6
22.9
77.1
57.9
42.1
72.8
74.3
344
28
114
37
15
3
0
1
16.6
31.6
43.7
67.5
22.8
3.5
6.3
69.7
20.9
3.2
6.2
71.0
21.1
3.2
4.7
50.3
3.9
11.2
0.9
12.7
21
24.0
22.5
15.9
37.6
56.8
43.2
22.8
77.2
58.9
41.1
73.8
75.2
338
23
118
38
17
4
0
1
17.8
32.0
43.7
72.7
20.1
3.1
4.2
50.7
3.4
10.6
0.6
13.1
21.6
23.1
22.3
15.8
38.9
56.4
43.6
22.8
77.2
58.9
41.1
75.4
76.3
339
24
117
39
19
4
0
1
19.4
32.3
43.5
73.6
18.7
3.3
4.4
50.8
3.1
8.8
0.8
13.1
23.4
21.7
22.4
16.7
39.3
58.4
41.6
22.3
77.7
58.9
41.1
74.5
76.5
341
18
111
44
21
4
0
1
20.2
33.8
44.8
73.4
18.7
3.6
4.2
50.7
3.2
9.0
0.8
12.8
23.4
22.3
21.7
16.7
39.4
56.0
44.0
22.5
77.5
58.5
41.5
74.6
76.4
340
23
116
44
21
4
0
1
20.0
33.8
44.1
Source: MOSL, Company
16 January 2019
8
 Motilal Oswal Financial Services
MindTree
Financials and Valuations
Key Assumptions
Y/E March
INR/USD Rate
Revenues (USD m)
Offshore Revenue (%)
Total Headcount
Per Capita Productivity (USD)
Offshore Uilization (%)
Volume growth (%)
Blended Pricing Change (%)
FY14
60.4
502
58.2
13,218
37,948
67.8
13.3
1.6
FY15
61.0
584
54.3
14,795
39,458
71.9
13.4
2.7
FY16E
65.6
715
46.6
16,958
42,175
69.9
16.5
5.2
FY17E
67.2
780
40.2
16,604
46,964
71.3
5.0
3.9
FY18
64.5
847
41.9
17,985
47,086
73.3
5.7
2.7
FY19E
70.6
998
41.3
20,473
48,748
74.5
17.2
0.5
FY20E
72.0
1,123
40.9
22,468
49,987
75.1
11.2
1.2
FY20E
72.0
1,266
41.5
24,417
51,834
79.0
13.7
-0.9
Income Statement
Y/E March
Sales
Change (%)
Cost of Services
SG&A Expenses
EBITDA
% of Net Sales
Depreciation & Amortization
Interest
Other Income
Forex
PBT
Tax
Rate (%)
PAT
Change (%)
FY14
30,316
28.4
17,820
6,394
6,102
20.1
809
4
376
120
5,785
1,275
22.0
4,510
34.1
FY15
35,619
17.5
20,741
7,786
7,092
19.9
1,018
1
656
179
6,908
1,545
22.4
5,363
18.5
FY16
46,896
31.7
28,026
10,571
8,299
17.7
1,332
3
417
393
7,774
1,741
22.4
6,033
12.3
FY17
52,364
11.7
34,125
11,058
7,181
13.7
1,858
191
553
(136)
5,549
1,363
24.6
4,186
-31.3
FY18
54,628
4.3
35,641
11,582
7,405
13.6
1,715
169
966
242
6,729
1,971
29.3
4,758
14.8
FY19E
70,440
28.9
44,307
15,330
10,804
15.3
1,624
29
593
491
10,234
2,639
25.8
7,595
60.4
FY20E
80,865
14.8
50,877
17,378
12,610
15.6
1,667
-
767
144
11,855
3,142
26.5
8,713
14.0
(INR m)
FY21E
91,123
12.7
57,564
19,240
14,319
15.7
1,654
-
960
355
13,979
3,705
26.5
10,275
17.9
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Loan
Capital Employed
Gross Block
Less : Depreciation
Net Block
CWIP
Other LT Assets
Investments
Curr. Assets
Current Investments
Debtors
Cash & Bank Balance
Loans & Advances
Other Current Assets
Current Liab. & Prov
Current Liabilities
Other liabilites
Provisions
Net Current Assets
Deferred Tax
Application of Funds
E: MOSL Estimates
FY14
417
15,988
16,405
195
16,600
6,886
3,621
3,265
496
1,967
175
14,688
5,160
6,004
1,184
613
1,727
4,393
82
0
4,311
10,295
402
16,600
FY15
837
19,287
20,124
357
20,485
8,879
4,366
4,513
354
2,699
8
18,526
5,343
6,963
3,763
836
1,621
6,064
536
0
5,528
12,462
449
20,485
FY16
1,678
22,278
23,956
1,090
25,046
10,323
5,698
4,625
232
9,737
58
18,148
2,101
9,728
2,332
1,570
2,417
8,356
1,679
415
6,262
9,792
602
25,046
FY17
1,680
24,091
25,771
314
26,085
13,029
7,279
5,750
192
6,672
58
20,610
8,094
8,962
2,508
12
1,034
7,821
1,651
978
5,192
12,789
624
26,085
FY18
1,639
25,775
27,414
94
27,508
14,023
8,994
5,029
92
6,837
58
25,031
7,206
10,155
3,289
3,098
1,283
9,857
1,710
3,000
5,147
15,174
318
27,508
FY19E
1,642
30,448
32,090
106
32,196
15,940
10,795
5,145
119
6,925
310
26,712
10,296
14,283
314
21
1,797
7,626
4,528
0
3,098
19,085
611
32,196
FY20E
1,642
35,586
37,228
106
37,334
18,650
12,034
6,616
119
6,925
310
31,349
10,296
16,048
2,956
24
2,025
8,596
4,528
0
4,068
22,753
611
37,334
(INR m)
FY21E
1,642
41,690
43,332
106
43,438
21,360
13,300
8,060
119
6,925
310
37,126
10,296
18,049
6,475
27
2,279
9,713
4,528
0
5,185
27,412
611
43,438
16 January 2019
9
 Motilal Oswal Financial Services
MindTree
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout %
Valuation (x)
P/E
Cash P/E
EV/EBITDA
EV/Sales
Price/Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
RoIC
Turnover Ratios
Debtors (Days)
Fixed Asset Turnover (x)
FY14
26.9
31.7
97.9
6.3
23.2
31.2
26.5
21.9
4.4
8.6
0.7
30.5
35.5
48.1
72
9.3
FY15
31.9
38.0
119.8
8.5
26.6
26.3
22.1
18.6
3.7
7.0
1.0
29.4
32.8
45.4
71
7.9
FY16
35.9
43.8
142.4
10.5
29.3
23.4
19.2
16.5
2.9
5.9
1.2
27.4
30.6
34.4
76
10.1
FY17
24.9
34.2
153.0
10.0
40.2
33.8
24.6
18.2
2.5
5.5
1.2
16.8
20.1
21.7
62
9.1
FY18
34.4
39.4
166.7
11.0
32.0
24.5
21.4
17.2
2.3
5.0
1.3
17.9
20.6
24.2
68
10.9
FY19E
47.3
53.3
195.0
15.0
31.7
17.8
15.8
11.8
1.8
4.3
1.8
25.5
30.7
35.4
74
13.7
FY20E
53.0
60.5
226.3
18.0
34.0
15.9
13.9
9.9
1.5
3.7
2.1
25.1
31.5
35.4
72
12.2
FY21E
62.4
70.1
263.3
21.0
33.6
13.5
12.0
8.5
1.3
3.2
2.5
25.5
31.4
36.9
72
11.3
Cash Flow Statement
Y/E March
CF from Operations
Cash for Working Capital
Net Operating CF
Net Purchase of FA
Free Cash Flow
Net Purchase of Invest.
Net Cash from Invest.
Proc. from equity issues
Proceeds from LTB/STB
Dividend Payments
Cash Flow from Fin.
Exchange difference
Net Cash Flow
Opening Cash Bal.
Add: Net Cash
Closing Cash Bal.
FY14
4,985
-1,766
3,219
-1,517
1,702
-657
-2,174
63
-252
-924
-1,113
0
-68
1,252
-68
1,184
FY15
5,955
28
5,983
-1,987
3,996
-41
-2,028
67
-5
-1,438
-1,376
0
2,579
1,184
2,579
3,763
FY16
6,730
-2,516
4,214
-1,315
2,899
-2,850
-4,165
24
802
-2,151
-1,325
0
-1,276
3,608
-1,276
2,332
FY17
5,318
1,217
6,535
-846
5,689
-3,742
-4,588
8
550
-1,934
-1,376
0
571
1,937
571
2,508
FY18
6,477
-833
5,644
-1,011
4,633
-991
-2,002
1
-720
-2,142
-2,861
0
781
2,508
781
3,289
FY19E
8,170
-6,886
1,284
-1,944
-660
-126
-2,070
3
802
-2,979
-2,174
0
-2,961
3,275
-2,961
314
FY20E
9,186
-1,026
8,160
-2,710
5,450
767
-1,943
0
0
-3,575
-3,575
0
2,642
314
2,642
2,956
(INR m)
FY21E
10,581
-1,141
9,440
-2,710
6,730
960
-1,750
0
0
-4,171
-4,171
0
3,518
2,956
3,518
6,475
16 January 2019
10
 Motilal Oswal Financial Services
MindTree
NOTES
16 January 2019
11
 Motilal Oswal Financial Services
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
> - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
MindTree
*In case the recommendation given by the Research Analyst becomes inconsistent with the investment rating legend, the Research Analyst shall within 28 days of the inconsistency, take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Securities Ltd. (MOSL)
*
is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock broking services,
Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed public company, the details in respect of
which are available on
www.motilaloswal.com.
MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd. (NSE) and BSE Limited (BSE), Multi Commodity
Exchange of India (MCX) & National Commodity & Derivatives Exchange Ltd. (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) & National Securities Depository Limited (NSDL) and is
member of Association of Mutual Funds of India (AMFI) for distribution of financial products. Details of associate entities of Motilal Oswal Securities Limited are available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf
MOSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOSL and/or its associates and/or Research Analyst may have actual/beneficial ownership of 1% or more securities in the subject
company at the end of the month immediately preceding the date of publication of the Research Report.
MOSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short
position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in
the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and
opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL even though
there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
Research Analyst may have served as director/officer, etc. in the subject company in the last 12 month period. MOSL and/or its associates may
have received any compensation from the subject company in the past 12 months.
In the last 12 months period ending on the last day of the month immediately preceding the date of publication of this research report, MOSL or any of its associates may have:
a)
managed or co-managed public offering of securities from subject company of this research report,
b)
received compensation for investment banking or merchant banking or brokerage services from subject company of this research report,
c)
received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.
d)
Subject Company may have been a client of MOSL or its associates during twelve months preceding the date of distribution of the research report.
MOSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOSL has incorporated a Disclosure of Interest Statement in
this document. This should, however, not be treated as endorsement of the views expressed in the report. MOSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result,
the recipients of this report should be aware that MOSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or
brokerage service transactions.
Terms & Conditions:
This report has been prepared by MOSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way, transmitted to, copied or distributed, in part
or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report
is not recommendatory in nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied,
is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to
buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOSL will not treat recipients as customers by
virtue of their receiving this report.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the
specific recommendations and views expressed by research analyst(s) in this report.
Disclosure of Interest Statement
Analyst ownership of the stock
MindTree
No
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary trading desk of MOSL or
its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOSL research activity and therefore it can have an independent view with regards to subject company for which Research Team have
expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject
MOSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to the Securities
and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong)
Private Limited for distribution of research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only
available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from
registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a registered
investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption
under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional
Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional
investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule
15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S.,
MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of
this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject
to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services license and an exempt financial adviser in Singapore,
as per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore.
Persons in Singapore should contact MOCMSPL in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of
whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such
Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced
in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in
this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of
independent judgment by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document
(including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including
those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy,
completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the
views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval.
MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform
investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this
into account before interpreting the document. This report has been prepared on the basis of information that is already available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and
the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or
published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such
distribution, publication, availability or use would be contrary to law, regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all
jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall
be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees
to exempt MOSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSL
or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring Centre, 2nd Floor, Palm
Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id:
na@motilaloswal.com,
Contact No.:022-38281085.
Registration details of group entities: MOSL: SEBI Registration: INZ000158836 (BSE/NSE/MCX/NCDEX); CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser:
INA000007100.Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409)
offers wealth management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate
products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products
*MOSL
has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f. August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law Tribunal, Mumbai Bench. The existing registration no(s) of
MOSL would be used until receipt of new MOFSL registration numbers.
16 January 2019
12