MindTree unlikely to see client desertions on crisis

The current crisis at mid-sized information technology firm MindTree Ltd may not see customers deserting it.  

A senior executive with a global research firm said he does not expect customer pulling out of contracts with MindTree due to current turmoil that the company is going through.

“That’s (customers cancelling orders) not a concern at all, especially for a company like MindTree which has a proven track record. Anyway, an (IT) customer does not care about a senior executive quitting or drop in revenue and profit numbers. As long as a vendor does not slip on execution or meeting schedules, the customer will not be bothered,” he said.  

Meanwhile, lack of clarity on the MindTree’s future course of action after the resignation of its executive chairman Ashok Soota dragged down its share price 5% on Monday.

The market reacted sharply to the exit of Soota, who announced his decision after the trading hours on Friday, as the company’s stock value fell 5.09% or Rs26.25 to Rs489 over the previous close.

The shares slid despite the positive news that the company’s non-compete agreement with Soota would ensure that employees and clients did not follow him to his new venture.

Analysts said Monday’s fall in MindTree stocks was a reflection of investors’ fears over its uncertain future.

“The company has underperformed the industry with its attention diverted to wireless product business, which they had to wrap up eventually. They seem to have missed the bus for taking advantage of the growth that has returned after recession. It is not certain how much it will take for them to come out of the current turmoil,” said an analyst with a domestic broking house.

Another analyst, who also wanted to remain anonymous, called MindTree “a maverick company”, which came up with brilliant ideas, which in the end proved “foolish.”

“I have had several discussions with the management but could never understand their complex business model and the rationale behind it. It defies logic. I prefer a simple model like the Infosys’,” he said.