Fitch Ratings has revised Bangalore-based IT company MindTree’s outlook to ‘stable’, following improvement in EBIDTA margins.
This revision was in line with Fitch’s expectations. It had earlier rated MindTree ‘negative’ on growth concerns.
MindTree's EBIDTA margins improved to 20.9 per cent in first quarter FY13 from 11.2 per cent in fourth quarter of FY11. This was driven by the company's changed recruitment practices, improved efficiency and reduced opex, according to Fitch.
The company has more than doubled its net profits to Rs 89 crore in the April-June quarter as compared with Rs 34.6 crore in January-March 2012. Revenues increased 36.2 per cent to Rs 563 crore during the April-June quarter from Rs 413.1 crore in the same period last year.
Additionally, a significant depreciation of the rupee against the dollar also boosted the EBIDTA margins. MindTree in its first quarter FY13 result said it gained Rs 8.6 crore in foreign exchange. The revision continues to reflect MindTree's position as the leading mid-sized provider of IT services for customers in the US and Europe with low debt and stable liquidity. In FY12, MindTree had cash of Rs 370 crore as compared with FY11 when it had Rs 156 crore on its books.
Even though revenue growth is expected to grow moderately this year due to a global slowdown, Fitch has affirmed a stable outlook for the Indian IT sector in 2012 on account of its strong liquidity position. In the last few quarters, Mindtree has grown by focusing more on existing clients and increasing revenues by cross-selling new services to them. This has seen CCD founder V. G. Siddhartha raising his stake to 21.63 per cent in Mindtree.