Tech Mahindra reported a higher-than-expected earnings in the September quarter on the back of improved revenue growth in communications, hi-tech and media, and banking, financial services and insurance verticals.
The consolidated revenue rose over 2% sequentially to Rs 13,313.2 crore in July-September against Rs 13,005.5 crore reported in the June quarter. The topline also beat Bloomberg estimates of Rs 13,211 crore.
“We continue to progress on our strategic improvement efforts even as the overall IT services industry has remained soft. We have focused on strengthening client relationships and expanding the partner ecosystem.” Mohit Joshi, chief executive officer and managing director of the company said.
The IT company’s operating margin, calculated as earnings before interest and tax, rose by 110 basis points quarter-on-quarter to 9.6%. The company’s management attributed this rise to cost-saving efforts under “Project Fortius” and the continued focus on operational efficiencies.
Project Fortius is a three-year plan unveiled by Tech Mahindra in April to achieve a 15% operating margin by FY27.
Meanwhile, the net profit of the company rose nearly 47% quarter-on-quarter to Rs 1,250.1 crore, also beating analysts’ expectation of Rs 1,013 crore. The sharp rise in bottomline was on the back of a whopping 260.4% sequential increase in the company’s other income at Rs 521.5 crore.
“This quarter we see consistent performance around increasing deal wins, revenue growth, cost optimisation and steady free cashflow generation as we continue our journey towards FY27 stated targets,” Rohit Anand, chief financial officer of the company said.
Further, the company’s net new deal wins rose to $603 million in the September quarter against $534 million recorded in the June quarter. However, it was tad lower than $640 million new deals bagged in the year ago period.
Vertical play in Q4
India’s fifth-largest information technology company’s revenue from its largest vertical — communications — rose 2.7% sequentially in constant currency terms and fell 1.7% on a year-on-year basis.
“As far as telecoms is concerned, we have seen stabilisation and growth in our Asia-Pacific portfolio. We are also seeing stabilisation and growth in our European telecom portfolio. We continue to see pressures in our US portfolio driven by client-specific pressures,” Joshi said.
“It is really very hard at this time to forecast what the telecom spending environment will look like next year. But I expect that we will get more clarity after the US elections about what the US telecom spend outlook will be,” he added.
The company saw a growth in hi-tech and media and BFSI vertical by 5.7% and 2.4%, respectively. Further, revenue from retail, transport and logistics rose 5.6% sequentially.
However, reversing the trend from the previous quarter, sales from manufacturing vertical fell by 4% in September quarter in constant currency terms. But, the second largest vertical of the company improved by 0.6%.
“The manufacturing vertical had a soft quarter as the outlook for discretionary spending in this vertical continues to be conservative,” Joshi said.
Further, the company’s revenue contribution from Americas fell in the September quarter, while the revenue contribution from Europe and the rest of the world rose. The revenue contribution from Americas decreased 0.7% sequentially on a constant currency basis and that from Europe rose 4.6%.
On the nascent technology of artificial intelligent (AI), Tech Mahindra said it is looking at building out a consulting framework.
“We have built out a consulting framework which is a mix of the horizontal use cases we see for AI. For instance, developer productivity, the work that needs to be done around talent, around cyber security. And then there are the vertical specific use cases we’re building for the telecoms business, for the manufacturing business, for the financial services business,” Joshi said.
The company further said that is sees a “significant interest” in Gen AI among its clients and it is leading to a “number of projects”.
“A lot of the large deals that we’ve won as well, including the financial services deals, and operations deal for the European communication services provider, have a significant element of AI built into it,” Joshi added.
Employee metrics
Tech Mahindra’s total headcount increased by 6,653 in the September quarter to 154,273. On a YoY basis, headcount was up by 3,669. Further, the company’s attrition rate rose to 11% from 10% reported in the June quarter.
Further, the company said it hired more than 2,000 freshers in the quarter ended September and is in line to add more than 6,000 freshers in FY25. In the June quarter, the company had added over 1,000 freshers.
From: financialexpress
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