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Why Mindtree share fell 11% despite 88% rise in Q2 net profit

Mindtree stock fell up to 11.44% to Rs 1264 against  previous close of Rs 1427 on BSE

twitter-logoBusinessToday.In | October 16, 2020 | Updated 13:28 IST
Why Mindtree share fell 11% despite 88% rise in Q2 net profit
Mindtree share price has gained 75% in one year and 62.67% since the beginning of this year.

Mindtree share price slipped over 11% today after the firm announced its Q2 earnings. Fall in share price came despite the IT firm reporting a 87.9 per cent rise in consolidated net profit. The stock lost up to 11.44% to Rs 1264 against  previous close of Rs 1427 on BSE.

The stock has lost 18% in three sessions. It trades higher than 20 day, 50 day, 100 day and 200 day moving averages but lower than 5 day moving averages.

However, the share has gained 75% in one year and  62.67% since the beginning of this year.

Total 3.35 lakh shares of the IT firm changed hands amounting to turnover of Rs 44.36 crore on BSE.

Market cap of the firm fell to  Rs 21,439 crore. On Thursday, the stock closed 8.11% or Rs 125 lower at Rs 1,427.

Mindtree Q2 margins improve; dollar revenue grows 3.1% sequentially

Decoding the fall in share price of the firm, Jyoti Roy, DVP- Equity Strategist at Angel Broking said, "Mindtree stock is down as sequential revenue growth at 3.1% qoq to $261mn was significantly lower than the 6-7% revenue growth numbers reported by larger companies like Infosys, HCL Tech and TCS. This was largely due to the company's exposure to the travel, tourism and hospitality segment which is among the worst impacted sectors due to the Covid-19 pandemic and due to lack of growth in the top 10 clients who account for around half of the company's revenue.

Moreover, new deals won during the quarter were also lower at $303mn as compared to $361mn in Q1FY2021. Given a subdued set of numbers relative to larger peers and expensive valuations relative to historical averages, we are witnessing a sharp selloff in the stock post the Q2 numbers."

The firm's year-on-year revenue fell around 3.7% year-on-year, and came below expectations, unlike its larger peers such as Infosys Ltd and Tata Consultancy Services Ltd.

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Consolidated net profit in Q2 came at Rs 253.7 crore against Rs 135 crore in the corresponding period last year. Revenue rose marginally to Rs 1,926 crore in the quarter under review from Rs 1,914.3 crore in the year-ago period, Mindtree said in a regulatory filing.

In dollar terms, its net profit climbed 79.2 per cent to $34.3 million, while revenue declined 3.7 per cent to $261 million in the September 2020 quarter over the year-ago period.

The company's active client base stood at 283, and eight new clients were added during the period, the Bengaluru-headquartered company said.

The board of directors announced an interim dividend of Rs 7.5 per equity share of par value of Rs 10 each. The record date for payment of interim dividend will be October 27, 2020.

Mindtree had 21,827 employees at the end of the September quarter with trailing 12-months attrition at 13.8 per cent.

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