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Informist, Thursday, Jul 25, 2024

 

--Tech Mahindra: Saw robust growth momentum in mfg segment Apr-Jun 

--Tech Mahindra: Communications sales fell on softness in arm Comviva 

--Tech Mahindra: Saw new opportunities in BFSI vertical 

--Tech Mahindra: Investment banking, lending ops seeing softness 

--Tech Mahindra: To continue to hire freshers over next few qtrs 

--Tech Mahindra: Seeing slightly more stable demand environment 

--Tech Mahindra: Have been selective about large deals we play in 

--Tech Mahindra: Don't see major changes in demand environment 

--Tech Mahindra: Margin trajectory to be upward going forward 

--Tech Mahindra: Margin improved YoY, QoQ on cost optimisation steps 

--Tech Mahindra: Infusing AI into all projects, programmes 

--Tech Mahindra: Market remains weak for telecom segment 

--Tech Mahindra: Expect growth trajectory of telecom segment to improve 

--Tech Mahindra: Hired close to 1,000 freshers in Apr-Jun 

--Tech Mahindra: Will take a decision on wage hikes in Oct-Mar 

 

By Anjana Therese Antony

 

MUMBAI – Cost optimisation steps announced in April helped Tech Mahindra Ltd post sequential improvement in its operating margin during the June quarter to 8.5% from 7.4% in Jan-Mar. The margin growth trajectory is expected to be upward going forward, the management said in a post-earnings press conference. 

 

The Pune-based company's three-year margin expansion plan, Project Fortius, was aimed at achieving an over 15% operating margin and growing revenue at a higher pace than the peer average by 2026-27 (Apr-Mar). "It is encouraging to see positive momentum in most industry verticals which has led to revenue growth and margin expansion in an otherwise seasonally weak quarter. We continue to focus on execution and are on track to achieve our stated goals for FY27," Mohit Joshi, chief executive officer, was quoted in a press release. 

 

A growth in the margin figure was widely anticipated, as various broking firms were waiting for the impact of the company's cost efficiency measures to kick in to consider stock re-rating or changing earnings estimates and outlook. In April, investors cheered the margin expansion plan announced in its Jan-Mar post-earnings analyst call, taking the stock a whopping 13% higher intraday. Today, the company announced its Apr-Jun earnings after market hours and its shares closed 0.2% lower at 1,530 rupees on the National Stock Exchange.

 

For the June quarter, the IT company's consolidated net profit grew nearly 29% sequentially to 8.52 bln rupees, lower than the Street's view of 9.09 bln rupees. Its consolidated revenue rose 1% on quarter to 130.06 bln rupees, higher than analysts' consensus estimates of 129.63 bln rupees. Compared to the year-ago period, this translates to a nearly 23% rise in the bottom line and 1.2?cline in the top line. The earnings before interest and tax rose 16.5% on quarter to 11.02 bln rupees.

 

Talking about the demand outlook, the management said it sees the environment to be slightly stable in the coming quarters, but major changes are likely. It also expects the financial performance in the current fiscal to be better than the previous one. Tech Mahindra, along with its other IT peers, had felt the heat of weak demand, lower discretionary spending, and high interest rates in the US for at least a year. However, experts said the worst is behind for the sector and better financial performance is seen in the quarters to come. 

 

The Pune-based company won net new deals worth $534 mln during the quarter, higher than those worth $500 mln in Jan-Mar. However, the number of active clients declined to 1,165 from 1,172 in Jan-Mar. The company said it has been selective about "large deals we play in" and is infusing artificial intelligence into all its projects and programmes.

 

The IT player's total headcount grew 1.5% on quarter in Apr-Jun to 147,620, while the trailing 12-month attrition remained unchanged at 10% for the third consecutive time. The management said it hired close to 1,000 freshers during Apr-Jun and may continue to hire over the next few quarters. Decisions on wage hikes will be taken by Oct-Mar, it added. 

 

VERTICALS, GEOGRAPHIES

Tech Mahindra's core vertical, communications, saw seasonal weakness and a nearly 2% sequential decline in its revenue, which also affected its arm Comviva's operations. This segment contributes to about 33% to the company's revenue. In the March quarter, the vertical's revenue fell 0.3% sequentially. Meanwhile, the management said it expects the growth trajectory of its telecom operations to improve in the coming quarters. 

 

Its next top vertical, manufacturing, saw robust growth momentum and led the sequential revenue growth in the June quarter, up 2.4%. The manufacturing division constitutes more than 18% of Tech Mahindra's revenue. 

 

When it comes to the banking, financial services, and insurance segment, revenue grew 0.7% on quarter. The management said it saw new opportunities in the BFSI space, while some softness is seen in investment banking and lending operations. 

 

Further, its revenue from the Americas grew 3.9% sequentially, while that from Europe declined 2.6%. The company said it aims to grow revenue from both these regions. About 52% of the company's revenue comes from the Americas and more than 23% is from Europe.  End

 

US$1 = 83.70 rupees

 

Edited by Deepshikha Bhardwaj

 

 

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