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Mid-Tier Indian Services Companies Looking Good

Posted on Thursday, Mar 29th 2012

Gartner may have reported pessimistic growth projections for worldwide IT spending this year. Compared with the past three years, the researcher believes that 2012 will see the slowest growth in IT spending at 4.6%. But that has neither dampened growth for the bigger IT players in India nor limited aspiration for the mid-tier players in the country. MindTree and Persistent Systems are among the bigger mid-tier IT companies in the market, and their results remain impressive.

MindTree’s Financials
MindTree is an India-based global IT solutions company that specializes in IT services, product engineering, infrastructure management and technical support (IMTS), and independent testing and knowledge services. It was founded in 1999 by professionals from Cambridge Technology Partners, Lucent Technologies, and Wipro. After clocking revenues of $9 million in their first year of operations, the company has grown to quarterly revenues of over $100 million. In the recently reported Q3 results, MindTree saw revenues grow 2% sequentially and 22% over the year to $103.7 million on a constant currency basis. Profit after tax was flat over the quarter and grew 80% over the year to $12.1 million. Today, MindTree has close to 260 active customers, including 44 Global Fortune 500 Companies. They ended the quarter with more than 10,930 employees.

MindTree’s Mobile Initiatives
MindTree continues to focus on developing solutions for industries, instead of solely relying on labor cost arbitrage. Recently they tied up with Netbiscuits, a leading cloud platform. Through the partnership, the two will develop and deliver next generation Web apps across all connected and mobile devices. They will be able to offer reusable solutions, templates, and development methodologies for their customers by bringing in cost-efficient solutions and a globally distributed services delivery team.

MindTree’s stock is trading at Rs 483.10 (~$9.18) with a market capitalization of Rs. 19.56 billion (~$371.69 million). It touched a 52-week high of Rs. 503.50 (~$9.57) earlier this month.

Persistent’s Financials
Persistent Systems is another Indian player that offers products and solutions to customers, not just labor cost arbitrage opportunities. Persistent Systems are the leaders of outsourced product development business for their customers. Based out of India, Persistent Systems earns more than 85% of their revenues from customers based in the U.S.

Recent results saw Q3 revenues grow 0.3% over the quarter and 20% over the year to $51.66 million. Profit after tax grew 25% over the quarter and 12% over the year to Rs 405.84 million (~$7.72 million).

Persistent Systems’ Expansion Plan
In February 2012, Persistent Systems announced the launch of solutions focused on email and social media analytics that will run on IBM’s InfoSphere BigInsights. The solution will help Persistent Systems move forward within the Big Data market. IBM’s Big Data platform enables enterprises to manage and analyze the data created by their consumers and businesses. Persistent Systems will help these consumers access this data and perform analytics that will help them improve business processes and customer offerings.

Also last month, they acquired the location business from Openwave Systems for an undisclosed sum. Openwave Systems’ location business helped deliver commercial and emergency location-based infrastructure to wireless operators. The move will help Persistent Systems expand within the location-based market.

Their stock is trading at Rs. 325.05 (~$6.18) with a market capitalization of Rs. 12.47 billion (~$236.96 million). It touched a 52-week high of Rs. 429.00 (~$8.15) in April 2011.

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