Analyst Concall
Macro weak but Tech Mahindra says retaining FY27 margin aim
This story was originally published at 21:43 IST on 16 July 2025
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--Tech Mahindra: BFSI vertical grew YoY in Q1, continues to be fast growing
--CONTEXT: Comments by Tech Mahindra mgmt in post-earnings analyst call
--Tech Mahindra: Hi-tech vertical faced headwinds in Q1
--Tech Mahindra: Budget cuts, semiconductor cos' restructuring hit hi-tech
--Tech Mahindra: Remain committed to our FY27 margins target
--Tech Mahindra: Levers like productivity to aid our FY27 plan on margins
--Tech Mahindra: Onsite staff numbers may rise as new deals see ramp up
--Tech Mahindra: Fresher hiring marginal in Apr-Jun
--Tech Mahindra: Will hire more freshers as we progress through the year
By Rajesh Gajra
NEW DELHI – Tech Mahindra Ltd. remains committed to meeting its earnings before interest and tax margin target of 15% for the financial year 2026-27 (Apr-Mar), the information technology company's management said in a post-earnings call with analysts and investors Wednesday. Replying to an analyst's question on whether the weak macroeconomic environment prevailing in the current financial year so far would make it tougher for the company to meet its growth and margin aspirations for FY26 and FY27, the management said when it had set the targets at the start of FY25, the expectation was that FY26 would see a return to normality from a revenue growth perspective.
Tech Mahindra's revenue in constant currency terms for the June quarter declined 1.4% sequentially and 1% on year. The company had said when it set the targets that FY25 would be a weak year in terms of revenue growth but the company would make a comeback in FY26 to close to standard industry average growth. "That promise has not been met yet... (but) having said that we are still holding on to our margin commitments for FY27," the management told investors and analysts.
The management said the company has been prudent in structure, contracting, and pricing of its large deals and in "not wanting to... win revenue at any price... that has put us in good stead in this environment compared to our peers who may have been too aggressive".
The management said it will deploy all levers possible under its ongoing Project Fortius, which is aimed at cost optimisation. The company's historical gap to peers in organic growth was more than 4-5%, and that narrowed in FY25, it said. "We will continue to narrow that in FY26 and then exceed the peer average in FY27," the management said.
The company will also focus on improving its utilisation rate going forward to meet the FY27 goals on growth and margin. In the June quarter, the utilisation rate went down owing to the weak demand scenario and training of a pool of talent for deployment to execute deals from the pipeline, the management said.
The 11.1% EBIT margin reported by Tech Mahindra for the June quarter was 50 basis points higher than in the previous quarter. According to the management, the margin expansion was reined in by headwinds in terms of seasonality in its subsidiary Comviva's business, higher visa costs, and lower utilisation. Comviva caters to companies in the telecommunications industry. These headwinds were offset by savings from Project Fortius, operational levers such as a favourable offshore mix, continued progress on the integration of portfolio companies, and other levers contributing to cost efficiencies, it said.
On the dynamics of offsite versus onsite in terms of staffing, the management said the company does not have a fixed percentage for offsite or onsite staffing, and it aligns with the kind of engagement the company is having with its customers. When deal wins see a ramp-up, the company "might see a temporary shift of some of the onsite numbers going up", it said.
To a question on hiring of freshers, Tech Mahindra's management said the number was up only marginally in the June quarter. But the company will "hire more freshers as we progress through the year", it said.
On segmental performance, the management said the hi-tech vertical's revenue declined in the June quarter because of "ongoing restructuring in the semiconductor industry, including steep budget cuts and workforce rationalisation at a key client". While these headwinds are playing out, the company is strengthening its capabilities in silicon design, embedded systems, and digital product engineering, the management said.
The revenue of the banking, financial services, and insurance vertical grew on year in the June quarter and this vertical "continues to be one of our fastest growing", the management said. Marquee Fortune 500 and Global 2000 customers in financial services and insurance have engaged with the company, "enabled by our key differentiation in asset and wealth management, payments, and core capabilities in platforms", it said.
Wednesday, shares of Tech Mahindra ended 1.8% higher at INR 1,607.90 on the National Stock Exchange. End
Edited by Rajeev Pai
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