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MindTree secures $14.4-m in 2nd round funding

Fakir Chand in Bangalore

MindTree Consulting Ltd, the Bangalore-based emerging global IT consulting company, promoted by India's top-notch technology professionals, has secured around $14.4 million in the second round of funding it went for this week.

Besides the existing venture capitalists, viz., the US-based Walden International and the Bangalore-based Global Technology Ventures, yet another US-based global investment management company, The Capital Group, has pitched in for funding the company along with promoters.

MindTree chairman Ashok Soota, however, declined to give the break-up of the investments made by the respective funding partners nor the promoters' share of contribution in the second round of funding.

"All that I can say is the valuation (read premium on the equity) for the second round was higher than what it was during the first round, when the company raised $9.5 million from the first two venture capitalists," Soota told rediff.com in Bangalore on Friday.

Post-second round, promoters as well as employees together hold around 62.4 per cent of the equity, with 16.6 per cent earmarked for the latter, and the remaining stake (37.6 per cent) is being held collectively by the three VCs.

Ever since its inception two years ago, the company's expanded equity capital has shot up to $23.90 million with higher valuation, technology meltdown notwithstanding. The 70-year-old Capital Group manages over $500-billion in assets, and is the leading manager of emerging market-assets, globally.

"The company will invest the funds judiciously to expand its market presence in the US, Europe, and Asia, with substantial investments going into building its worldwide infrastructure. We have already opened an office in the UK and are looking at three more countries in Europe, besides Japan. We will also be expanding our Singapore facility," Soota stated.

Company's vice-chairman and president Subroto Bagchi said the second round of funding would allow MindTree to continue its global expansion, and strengthen its thought-leadership, especially in the concurrent software development.

Bucking the global technology meltdown, particularly in the US, the company has won six major contracts in as many weeks with one every week.

"In one case, we have bagged a huge order from a global financial institution to provide wireless network protocol, connecting its worldwide operations," Soota claimed, adding that the projects are worth multi-million dollars with orders ranging between $300,000 and $2-million.

As a direct beneficiary of the slow down in the US economy, MindTree has not only retained most of its existing customers, but also bagged a few more, including tech firms, which have decided to increasingly outsource from India.

Withering the current storm in the tech sector, the company had neither faced any pressure on its billing rates nor decline in growth rate during the current fiscal year.

"We will continue to grow over and above the industry's growth rate, and are sticking to the target of $231 million we have set for the fiscal year 2004-05. Our pricing strategy and business model has insulated us from the impact of the ongoing slow down in the global tech sector, especially in the US," Soota claimed.

The privately-held company had a revenue of Rs 705 million ($15 million) during the preceding fiscal year (2000-01), posting a growth rate of 93 per cent over the corresponding period of its first year's partial (two quarter) operations.

During the last two years, the company has executed 75 projects for over 40 of its customers globally, with the majority in the US. De-risking its initial exposure to dot-coms and start-ups, it has moved towards enterprise resource planning, supply chain management, data warehousing, infrastructure support services, and mobile/wireless applications, including Bluetooth and Voice over the Internet Protocol devices.

With around 65 per cent utilisation rates of its 450-employee strength, MindTree is gearing up to get into application management practice for its global customers, telecom, brick and mortal, financial services, etc.

Committing itself to the growth of the India Inc., in terms of technology infusion and upgradation, MindTree has chalked out a separate pricing strategy for its Indian customers such as Hindustan Levers Ltd, HDFC, NSE, etc.

"Our billing system is designed to be geographic and locale specific," Soota averred.

Unlike in the case of major Indian global software companies such as Infosys and Wipro, MindTree is leveraging on its lean-and-mean structure to hold on to its pricing strategy and has not felt any pressure on its billing rates.

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