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Informist, Saturday, Oct. 19, 2024

MUMBAI - Tech Mahindra Ltd. does not see a major change in the demand environment, which has remained muted for almost two years now. "As far as demand environment is concerned, I would say it is largely unchanged from what we had said last time. We don't see any significant difference," the management said in a post-earnings call with analysts Saturday. Weak demand environment, coupled with sharp cutdown in discretionary spending by clients, and high interest rates in the US had hit Indian IT companies' financials.

The Pune-based company also said it will continue to prioritise margins over large deals at this point of time. "In this environment, it is very tempting to do the sort of deals that can potentially come back to bite you later...and we are shying away from that," the management said. However, there is a huge will to win and to make sure that the company is getting a fair share of large deals, it added. During the September quarter, the information technology company won net new deals worth $603 million, higher than the $534 million it received a quarter ago.

The company has also been tracking its progress in generative artificial intelligence skilling and has been embedding it to various deals. The company announced a strategic partnership to boost generative artificial intelligence adoption and lead digital transformation for various entities of Mahindra & Mahindra during the quarter, it said in a press release. 

When it comes to two of its segments--banking, financial services, and insurance, and manufacturing, the company said these divisions are most exposed to furlough pressures. "We will probably get a better visibility on furloughs over the next four to six quarters as the customer expectations start to flow," the management said. There appears to be a slight improvement in sentiment, but it is not a dramatic shift, it added.

When asked about the impact of rate cuts in the US, the technology consulting and digital services provider said reduction in interest rates will offer a degree of relief for telecommunication clients as they carry heavy debt loads. Therefore, it will allow them to spend more from a debt perspective, it added. The company's core communications segment, which contributes over 33% to the revenue, saw a sequential growth in Jul-Sept after posting decline for six quarters, which was primarily due to stabilisation from Asia-Pacific and European portfolios. However, its US telecommunications portfolio continued to see pressure.

For the September quarter, the company's consolidated net profit grew nearly 47% sequentially to INR 12.50 billion and revenue rose 2.4% to INR 133.13 billion, both higher than what the Street had expected. The bottom line growth was the fastest in the last 20 quarters and the top line growth was the strongest in seven quarters. Shares of Tech Mahindra closed 0.7% lower at INR 1,687.90 on the National Stock Exchange Friday. The stock has risen 2.5% in the last seven days and 44% in 52 weeks.  End

US$1 = INR 84.07

Reported by Anjana Therese Antony and Gopika Balasubramanium

Edited by Vandana Hingorani

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