Tech Mahindra Q1 beats estimates, profit spikes 36%; dollar revenue grows 0.6%

Tech Mahindra started off the financial year 2017-18 on a strong note as first quarter earnings beat analysts' expectations on all parameters. Profit grew sharply by 36 percent sequentially to Rs 799 crore, driven by operational performance as well as other income.

Revenue from operations declined 2.12 percent quarter-on-quarter to Rs 7,336.1 crore but dollar revenue grew by 0.6 percent to USD 1,138.1 million in the quarter ended June 2017.

"Despite all headwinds in a seasonally weak quarter, digital business is growing ahead of our expectations backed by solid execution as we realign focus from Run side of the business opportunities to Change and Grow," CP Gurnani, MD & CEO said.

Profit was estimated at Rs 595 crore on revenue of Rs 7,317 crore and dollar revenue was expected at USD 1,134.5 million for the quarter, according to average of estimates of analysts polled by CNBC-TV18.

Earnings before interest and tax during the quarter increased 11.8 percent to Rs 687.8 crore and margin expanded by 120 basis points to 9.4 percent compared with previous quarter, which too were ahead of estimates of Rs 632 crore and 8.64 percent, respectively.

"Revenue growth was beat by 1.2 percent and margin by 80 basis points compared to our estimates," Karan Taurani of Dolat Capital said. The change in rating (which is currently "Reduce") is largely depending upon future margin sustainability, according to him.

Urmil Shah of IDBI Capital also said it was a beat on all parameters.

Margin, which had been disappointed for previous four quarters, rebounded sharply that could be major reason for upside in the stock on Tuesday when it will open for trade.

Other income during the quarter increased 72.6 percent to Rs 410.7 crore on sequential basis.

Active clients at the end of June quarter increased to 864 from 843 in previous quarter, i.e. addition of 21 clients; and repeat business improved to 97.2 percent from 93.5 percent QoQ.

Tech Mahindra added 5 clients in USD 20 million category, 3 clients in USD 10 million band, 5 in USD 5 million and 23 clients in USD 1 million category during the quarter.

Attrition rate for the quarter remained steady at 17 percent and utilisation also maintained at 77 percent on quarter-on-quarter basis.

The stock price of Tech Mahindra, which announced earnings after market hours, closed up 1.35 percent at Rs 385.25 on the BSE.