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Informist, Wednesday, Jan. 14, 2026

 

By Shakshi Jain

 

NEW DELHI – Information technology services major Tech Mahindra Ltd. is expected to report a marginal sequential increase in its consolidated top line for the December quarter on a recovery in its communications vertical, which accounts for a third of the company's total revenue. The company's bottom line is expected to rise by double digits sequentially, helped by operational efficiencies through Project Fortius and depreciation of the rupee against the dollar.

 

Tech Mahindra's consolidated top line for the December quarter is expected to rise 1.2% sequentially and 6.6% on year to INR 141.68 billion, according to the average of estimates from 18 brokerages. The highest revenue estimate is INR 143.22 billion by Dolat Capital Market Pvt. Ltd. and the lowest is INR 138.23 billion by DRChoksey FinServ Pvt. Ltd.

 

The Pune-based company's consolidated bottom line for the reporting quarter is likely to rise almost 16% on quarter and over 40% on year to INR 13.81 billion, according to the average of the estimates. The highest net profit estimate is INR 15.15 billion by Nomura Financial Advisory and Securities (India) Pvt. Ltd. and the lowest is INR 12.91 billion by Nuvama Wealth Management Ltd.

 

For the quarter under review, analysts anticipate a recovery in revenues from the company's communications vertical, which had declined 2% in the trailing quarter. In a conference call with analysts post the September quarter earnings announcement, the company's management had said it expects stability and growth to return in the communications vertical during the second half of the ongoing financial year.  

 

Indsec Securities & Finance Ltd. expects some revival in demand from select pockets in the automotive sector due to vendor consolidation for Tech Mahindra's second-highest revenue-generating vertical – manufacturing. Some brokerages also expect growth in the company's retail vertical and its software platforms business Comviva Technologies, for the reporting quarter.

 

Tech Mahindra's overall revenue growth for the December quarter is expected to be capped by furloughs, particularly in the banking, financial services, and insurance vertical.

 

In dollar terms, the company's revenue is eatimated at $1.59 billion, as per the average of estimates from 14 brokerages. Emkay Global Financial Services Pvt. Ltd. expects a cross-currency impact of 10 basis points for the reporting quarter.

 

Brokerages anticipate a 0.3-1.5% sequential increase in the company's constant currency revenue for the reporting quarter. Only Nirmal Bang Equities Pvt. Ltd. expects the company to report a decline in its constant currency revenue for the December quarter, although this is only a negligible fall of 0.1%. This is "mainly due to furloughs as it has a larger exposure to telecom and manufacturing as compared to peers, and it has seen strong growth in 1Q (Apr-Jun) and 2Q (Jul-Sep)," the brokerage said.

 

Nomura and Prabhudas Lilladher Pvt. Ltd. expect the company to report aggregate deal wins in the range of $600 million–$800 million, while Kotak Securities Ltd. is more optimistic with a projection of $875 million–$900 million. "New deals are likely to have higher margin," Kotak Securities said.

 

LABOUR CODE IMPACT

Tech Mahindra's larger peers – Tata Consultancy Services Ltd. and HCL Technologies Ltd. – have reported considerable one-time costs for the December quarter due to an increase in provisions for employee benefits, prompted by the new labour code. An analyst at a domestic brokerage firm said this was expected for all IT companies, but this has not been factored into the estimates because the quantum of the impact could not be gauged at the time. 

 

TCS reported a one-time statutory impact of INR 21.28 billion in the December quarter on account of the new labour code, which was 3.2% of its revenue and 5.5% of its employee benefit expenses for the reporting quarter. Similarly, HCL Technologies reported a one-time cost of INR 9.56 billion, accounting for 2.8% of its top line for the quarter and 5% of its employee benefit expenses.

 

"For services businesses, it will not be different from this math. In case of software companies, this percentage will be very high because... if you have a very experienced team, the impact will be higher," the analyst said.

 

Under the new code, which came into effect in November, basic pay must account for at least 50% of an employee's total cost to the company. As a result, payouts tied to statutory contributions such as gratuity and leave-related benefits are set to increase for companies.

 

OPERATIONAL OPTICS

Most brokerages anticipate a 50-70 bps improvement in the company's earnings before interest and tax margin for the reporting quarter, led by operational efficiencies and the depreciation of the rupee.

 

In 2024, Tech Mahindra had launched a three-year turnaround roadmap called Project Fortius, which was aimed at increasing its EBIT margin to 15% by March 2027 from 7.4%. The company has expanded its margins in the last six quarters to 12.1% for the September quarter.

 

"We expect further margin improvement and expect the company to exit FY2026E with 13%+ EBIT margin," Kotak Securities said. Nuvama expects the company to retain the 15?IT margin guidance for FY27-end.

 

Tech Mahindra will announce its December quarter earnings on Friday. Investors await the management's commentary on IT budgets of clients for 2026, the deal pipeline and conversion timelines, demand across verticals, pricing environment, and hiring plans.

 

At 1148 IST, shares of Tech Mahindra were down 0.8% at INR 1,601.10 on the National Stock Exchange. The stock is up over 9% since the company reported its results for the September quarter. It is down 7.8% from its 52-week high of INR 1,736.4, recorded on Jan. 24 last year.

 

Of the 21 research recommendations on Tech Mahindra available with Informist, 14 have a 'buy' recommendation on the stock, while three have a 'hold' and four have a 'sell' recommendation. The average target price of the 'buy' recommendations is INR 1,760 and that of the 'sell' calls is INR 1,448. This is almost 10% higher and 9.6% lower than the current market price, respectively.

 

Following are the Oct-Dec earnings estimates for Tech Mahindra from 18 brokerages in descending order of the estimate of net profit in INR million:

 

Broking firm	Net sales (in INR mln)	Net profit (in INR mln)	Revenue (mln $)	EBIT margin (%)
Nomura Equity Research	141,295	15,146	1,588	12.7
Motilal Oswal Financial Services Ltd	142,000	14,500	1,591	12.7
Emkay Global Financial Services Ltd	142,345	14,401
YES Securities (India) Ltd	143,221	14,339
JM Financial Institutional Securities Pvt Ltd	141,417	13,976
Dolat Capital Market Pvt Ltd	143,010	13,828	1,601	12.4
Elara Securities (India) Pvt Ltd	141,861	13,800	1,594
Indsec Securities and Finance Ltd	141,400	13,800	1,600	12.5
ICICI Securities Ltd	142,324	13,787	1,590	12.7
DRChoksey FinServ Pvt Ltd	138,234	13,683
Nirmal Bang Equities Pvt Ltd	141,437	13,663	1,597	12.6
Prabhudas Lilladher Pvt Ltd	141,700	13,600	1,589.90	12.6
Sharekhan Ltd	140,573	13,562	1,579	12.8
HDFC Securities Ltd	141,980	13,500	1,593	12.5
HSBC Global Research	141,946	13,361	1,593	12.6
IDBI Capital Market Services Ltd	141,688	13,319	1,592	12.3
Kotak Securities Ltd	141,834	13,317	1,590	12.7
Nuvama Wealth Management Ltd	142,036	12,908.80	1,596
Average	141,683	13,805.04	1,592.42	12.59

 

End

 

US$1 = INR 90.19

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Avishek Dutta

 

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