Topic: Indian/Asian Company entered Britain market and the impact post Brexit

Project by: Ms Charu Sharma

Course : International Management
Inspiration

: Prof Manoj Thomas

Background
It is an Indian multinational company which is into Consulting and Information
technology and have their headquarters in Bangalore, India and NJ.
Known to deliver the digital transformation and technology services with a collaborative
approach to have customize solutions eventually helping the clients to outperform.
Not just this much they have an expertise in infrastructure and applications
management which is really a booster for transforming IT into strategic asset.

Services

Application development
Application Maintenance
Data Analytics
Digital services
Engineering R& D
IT strategy and consulting
Infrastructure Management Services

Industries Cater to

Banking
Capital Markets
Consumer devices and Electronics
Consumer Packaged Goods
Enterprise software
Manufacturing
Insurance
Media & Entertainment
Retail
Semiconductors
Travel, Transportation and hospitality

With the further growth Mind tree planned and acquired UK-based Bluefin for 42.3
million ($66.13 million) in all cash transactions and intend to make a payment of 34
million ($53.2 million) and the remaining to be paid in three parts as in three years.

As a company, Bluefin is known for business consulting, technology & strategy, SAP
implementation, analytics, digital, mobile, web, cloud and SAP HANA.
The idea of acquiring Bluefin by Mind tree was to help SAP clients digitize the value
chain and eventually leading to customer satisfaction by developing the harmony
between the front end and back end systems.
As per the CEO, acquisition will further strengthen the position of the company to offer
more SAP services to the customers and focus on SAP HANA and the expertise of
Bluefin can be leveraged in delivering transformational services ensuring that service
delivery is effective and efficient.

Impact of Brexit

Source : economictimes.indiatimes.com/markets/stocks/earnings/mindtrees-q1results-short-of-market-target-profit-falls-8-7/articleshow
As we have read in so many articles that 2016 has not been a very good first quarter for
most of the IT companies especially Indian and we may see worse results.
Three largest firms reported bad figures and all owing to the July month, Britains call to
leave European Union and this impact was not very well factored. It has not been a
good first-quarter for Indian IT companies and the year may just get worse.
In of the interviews with CNBC the Executive chairman Mind tree said that Europe
business was impacted by the Brexit and the stock price dropped around 5.2 % and net

profit fell about 7.1% and even EBITDA dropped 11.6%. This was basically owing to
challenging macro environment and Brexit.
Although there was no impact on the demand however due to environmental conditions
people are cautious. Also it was mentioned that there was sharp reduction in the
revenues of SAP HANA business which was acquired by Mind tree in UK and they
observed business loss from profits. Hence this slowdown in the small business
reported a loss. Overall company intends to deliver higher than other years.
If we look at the companys performance the overall order placement in the pipeline is
very good and fresh contracts are also coming in and that is across the new and the
existing customers. The only impact that has been observed is the environmental
change and which is putting people in dilemma and therefore the decision making
process has slowed down. As there is lot of uncertainity and we people start with the
project but the response rate is extremely slow and hence we see the quality of pipeline
projects is not really good. So what mind tree experienced or is worried was the
velocity, closure and the scale ups not the number of the orders.
As we all know post Brexit margins of the IT companies was anticipating the heat and in
the first quarter of the year as we knew that wage hike and visa cost may move up.
So the reports confirm that Mind tree reported a drop in profits as some of the clients
changing the patterns and style of spending on technology owing to the global
macroeconomic changes and uncertainties across.
As mentioned above company did see the change in the numbers and was 7.1% behind
than the last years performance. Although there were numerous factors but majorly the
impact was because of the slower responses a d delayed scale ups by some of the
clients onboard.
The business in UK contributes about 13% of the company revenues and in the first
quarter its reduced owing to the global uncertainty which was as known by us was
triggered by Brexit. The impact on the Bluefin margin or revenue decline from last year
to the first quarter and there was approx. $10 M in the previous quarter whereby its $9M
in this quarter so $1M decline is quite high although they will work on it based on the
customer pipeline they have.
Despite of the uncertainty Mind tree is confident to beat the revenue growth in the 2017
fiscal year and some of the comparisons show that the revenues have gone up to
35.8%.

Another important fact where the margins of Mind tree saw a drop of 14.7% from 16.7%.
And as it was mentioned above was because below important factors

Wage Hike
Visa Costs (approx. 1%)
Loss in the Bluefin Solutions(0.8%) acquired in the UK
Currency Impact (0.2%)

Source : http://economictimes.indiatimes.com/mindtree-ltd/stocks/companyid15673.cms
Mind tree Strategy and Change
They rolled out annual hikes of 8 to 10 % for the offshore employees and 2-4% for the
onsite employees and which should be in line with the industry.
Also, they worked on the attrition and 12-month rate was at 16.5 which was by the end
of the June quarter.