Tech Mahindra sees margins pressured, inflation a worry

Tech Mahindra, India's No 5 IT outsourcing firm, faces a challenge to maintain margins at about 22% due to rising costs and competition, its chief executive said on Thursday.

Tech Mahindra hopes the Indian government will do more to keep inflation down as rising prices, wages and a firming rupee in Asia's No 3 economy are pressuring margins, or EBITA, which could narrow further, CEO Vineet Nayyar said. "That is our challenge," Nayyar told Reuters at the World Economic Forum in Davos, Switzerland, referring to whether the company's margins, which has been trending down over the past few years, can be maintained around 22%. India's high inflation prompted the central bank to raise interest rates by 25 basis points this week, the seventh time since March, though Nayyar said the government could do more. "Absolutely, there is no question about it. Inflation is the biggest risk to growth," he said. "Inflation is always a worry because it increases wages and cuts down margins, so we hope that the government will do some cost-effective measures," Nayyar said. Tech Mahindra, in which BT Group owns a roughly 25% stake, provides IT services to the telecom sector and counts among its clients AT&T, Alcatel-Lucent, Motorola and Vodafone.