Name – MindTree

CMP – INR 376.60

Market Cap – USD 0.3 billion

Profile: MindTree, a well – respected midsized information technology company offers services ranging from application maintenance, Business Intelligence, Independent Testing, product development, etc. Currently co-headquartered in Warren, New Jersey and Bangalore, it has 3 development centers in India and 23 offices spread across Asia, Europe and the United States. MindTree has been involved in the creation of Bluetooth technology and is an Associate Member of the Bluetooth Special Interest Group.

History: MindTree Consulting filed its draft red herring prospectus with the SEBI for its IPO in December 2006. The IPO was oversubscribed more than 100.0 times. Along with many other awards, MindTree was declared the Number 1 Most Admired Knowledge Enterprise in India by Teleos, in association with the KNOW Network. Today, MindTree, with over 30.0% CAGR growth in past 3 years, has proven that the idea called MindTree holds promise.

Few promising points about the Company:

  • P/E of only 9.1x, as compared to the industry P/E of 25.7x
  • Healthy EPS of INR 30.78
  • Income from software development grew to INR 12,332.0 million for the year ended March 31, 2010, which represents an increase of 22.0% over INR 10,126.0 million in 2009. Growth across both overseas and domestic markets was witnessed. Export revenues grew by 20.0% to INR 11,417.0 million whereas domestic revenues grew 42.0% to INR 915.0 million
  • Company has added a built-up capacity of 106,000.0 sq. ft. and added 1,000 seats. With this, the total built up capacity of the Company in India stands at 1,326,000.0 sq. ft
  • Strategic Acquisitions:
  1. NOIDA based ASAP solutions in 2004 for all cash deal
  2. Bangalore based Linc Software Services Pvt Ltd. in 2005 for stock and cash
  3. TES – Purple Vision in December 2007
  4. Majority Equity Interest in Aztecsoft
  5. Chennai based 7Strata : Remote IT Infrastructure Management Services
  • Liquidity: The Company maintains sufficient cash to meet its operations and strategic objectives. As on March 31, 2010 the Company had liquid assets of INR 1,614.0 million as against INR 477.0 million as of March, 2010. These funds have been invested in deposits with banks and in money market mutual funds

Strategy going forward: MindTree will now focus on fewer verticals unlike the earlier strategy where it was positioned as an all-services IT provider. This would help the company getting repositioned as a niche IT player in select verticals. As per the new strategy, company will market its service offerings as – IT services and Product engineering services (PES). PES would include both R&D services and software product engineering services into one entity.

Conclusion: The Company recently lost contract worth USD 2.5 million from Japan based Kyocera. Though this will hurt the revenues of the Company, I think this is a very good time to enter the stock as it is trading at a heavy discount.

The Company has already shown glimmers of recovery in Q4 FY 2011 after it wrote off this wireless business venture.

Rupee appreciation is the only hurdle, the Company will be facing in the long term. Resignation of Ashok Soota (co-founder and executive chairman) is also not expected to have a long term impact on the stock.

The number of strategic acquisitions has given a very strong sentiment to the investors. With strong Q4 results and healthy future prospects of the Company, doubling the money via this multi – bagger in less than 3 years is certainly on the cards.

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