Tech Mahindra posts Q2 revenue growth of 5.1% at Rs 9,070 cr, PBT down 7.5%

Pune-headquartered Tech Mahindra on Tuesday reported that it had beaten Street estimates, with its revenue growing to Rs 9,070 crore in the July-September (Q2) of 2019-20 (FY20), a 5.1 per cent rise year on year (YoY). Its profit before tax (PBT), however, was down 7.5 per cent to Rs 1,337.7 crore YoY.

A strong digital growth and new deals, however, helped it clock 5.6 per cent YoY growth in profit after tax (PAT) to Rs 1,124 crore. In the June quarter, the company had missed estimates to report revenue earnings of Rs 8,653 crore and PAT of Rs 959 crore.

On a quarter on quarter (QoQ) basis, the firm’s revenue grew 4.8 per cent and PAT grew 17.2 per cent. Bloomberg had estimated 3.3 per cent YoY revenue growth and 12.3 per cent dip in net income. Earnings before interest, tax, depreciation, and amortisation (Ebitda) stood at Rs 1,500 crore, while the Ebidta margin was reported at 16.5 per cent, up 130 basis points. Sources said overall efficiency and lower visa costs helped the numbers.

In dollar terms, the company’s profit was at $158.6 million, while revenue was $1.28 billion in the Q2FY20.“We had indicated in Q1 that we were in the closing stages for a few large deals and it has been a record quarter for deal wins. We saw broadbased revenue growth across all geographies,” said C P Gurnani, managing director and chief executive officer, Tech Mahindra. During the quarter, the company signed a six-and-a-half-year agreement with AT&T to expand strategic collaboration, accelerating the latter’s IT network transformation, shared services modernization, and movement to the cloud.

This deal comprised over $1 billion. The total contact value reported during the quarter was $1.49 billion. Revenue flow from this deal will start by Q4FY20, said the management of the company. However, the deal wins will also come with transition costs, they said. The company also announced the acquisition of BORN Group, an integrated agency headquartered in the US, to bolster capabilities in commerce and customer experience (CX). BORN Group offers end-to-end digital engagement for $95 million. The company will also in-source all 1,000 employees.

Manoj Bhat, chief financial officer, Tech Mahindra said, “Except for manufacturing, growth has been good. Europe was flattish because of a currency impact. Our tax rate was slower because of a large tax refund this quarter of about 17 per cent while it is usually around 26 per cent.” The management said all transition costs from these deal wins will be completed in the next two quarters and they have already started the processes.

Total headcount stood at 131,522, up by 5,749 QoQ, largely led by BPO services while software headcount reduced. Attrition remained at a high of 21 per cent while employee utilisation also remained high at 83 per cent.

Tech Mahindra Q2 profit grows 17.2% QoQ to Rs 1,124 crore

Tech Mahindra on Tuesday reported a 17.2 per cent QoQ rise in its consolidated net profit at Rs 1,124 crore for September quarter of the fiscal year 2020 (Q2FY20). On YoY basis, the numbers grew 5.6 per cent.

Revenue for the quarter came in at Rs 9,070 crore, up 5 per cent YoY and 4.8 per cent on QoQ basis.

Earnings per share (EPS) for the quarter came in at Rs 12.88.

“We are thankful to our customers for believing in our capabilities despite a tough demand environment. Our consistent large deal wine is a testimony of our differentiation in the marketplace. We are confident of our growth outlook for both Communications and Enterprise businesses. ‘Digital’ continues to be a strong growth driver, as we help our customers in their transformation journey," said CP Gumani, Managing Director & Chief Executive Officer.

In constant currency terms, revenue grew 4.1 per cent while revenue in US dollar terms increased 3.2 per cent QoQ to U$1,287.2 million.

Further, the company said the deal wins in Q2 was at a record high of nearly $1.49 billion. During the period, Tech Mahindra signed a muiti-year agreement with AT&T to expand strategic collaboration accelerating AT&T’s IT Network Transformation, shared services modernization and movement to the cloud.

Total headcount during the quarter stood at 131,522, up 5,749 QoQ.

Tech Mahindra Q1 net profit up 6.8% to Rs 959 crore, revenue rises 4.6% YoY

Pune-headquartered software firm Tech Mahindra (TechM) missed the Street estimates for the June quarter as it reported revenue earnings of Rs 8,653 crore, up 4.6 per cent year on year (YoY) and down 2.6 per cent sequentially. Profit after tax (PAT) was Rs 959 crore, up 6.8 per cent YoY and down 15 per cent over the quarter.

Analysts had estimated a seasonal impact on the communication vertical to affect revenues by up to 2 per cent on a sequential basis and 5 per cent over the year. Profit estimates were factored to dip 6.6 per cent over the quarter and grow 9 per cent YoY.

In constant currency terms, revenue grew 3.7 per cent while Ebitda (earnings before interest, tax, depreciation and amortisation) slipped 320 bps YoY to Rs 1,314 crore. Operating margins came in at 15.2 per cent, down 120 basis points (bps) YoY and 320 bps QoQ.

“The communications (vertical) business was down 3.2 per cent over the quarter due to seasonality in mobility business and it was flat minus the seasonality in constant currency basis. The overall deal pipeline is robust and larger than what we had in the previous year,” said C P Gurnani, chief executive officer and managing director, TechM. He, however, remained optimistic about communication.

Health care was among the few businesses that remained robust in the quarter while manufacturing and BFSI took a hit. Ebitda was impacted by 100 bps each due to mobility slowdown as well as wage hikes. Visa costs and currency headwinds continued to weigh in on the margins as well as about 70 bps impact on forward looking investments.