Mindtree – the long march to $1b

(By Anthony Miller – Monday 26th October 2009 2:00pm). It’s a long way from here to there. ‘Here’ is the $255-270m that mid-tier India-based SI, Mindtree, expects to turn over this FY (to March 2010). ‘There’ is the $1b in revenues it’s aiming for in 2014 (see Mindtree eyes a billion – from a distance!). That’s 40% cagr, which clearly isn’t going to happen organically. Indeed, Mindtree’s Q2 revenues (to 30th Sept.) were down 9% yoy to $65m, though up 5% qoq, a sequential growth rate much in line with larger peers. About a fifth of Mindtree’s revenues derive from UK/Europe.

Mindtree took another small step on the M&A trail just at the end of the quarter, acquiring Kyocera Wireless (India), the ‘captive’ wireless product development, software engineering, and product testing unit of Kyocera Wireless Corp. It’s a much smaller deal than Mindtree’s acquisition of (now) 80% of Aztecsoft in May ’08, worth some $80m, with just $6m being paid up front for KWI and the expectation of $9m in revenues over the next 6 months. That’s really not going to get them much closer to the ‘magic billion’.

I do believe there’s a role for smaller offshore players like Mindtree, but it’s really more to do with serving mid-tier clients rather than trying to do battle with top tier Indian SIs on their home turf. The problem is, I really haven’t heard much to make me think that Mindtree’s management are staking out a differentiated and defensible market position in any market, let alone a credible growth path to $1b.