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Last Updated : May 22, 2019 04:35 PM IST | Source: Moneycontrol.com

Tech Mahindra betting big on telecom sector's revival for growth, says CFO

In India, defence modernisation is another focus area for the company. The company recently signed Rs 300 crore defence contract.

Swathi Moorthy @kpswathi
 
 
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Tech Mahindra is betting on communication segment to drive growth in FY20, on the back of deal wins and increasing spending by telecom providers, said Manoj Bhat, Chief Financial Officer, Tech Mahindra.

Speaking to Moneycontrol, Bhat said, “What we are seeing is a revival in spending in telecom backed by deal wins across the board from the US to New Zealand.”

“If you look at that trend, this is a trend which ceased. From 2015 onwards there has been a bit of a slowdown in that vertical. To me, that is a very positive sign. Hoping that that kind of momentum would continue going to next year,” he added.

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Communications is the largest revenue generator for Tech Mahindra.

The company reported a 13.1 percent increase in its FY19 consolidated net profit at Rs 4,298 crore. Its revenue rose 12.9 percent to Rs 34,742 crore in the year ended March 2019, from Rs 30,772 crore in the corresponding period of the previous year.

However, the communications vertical saw a dip in revenue in FY19. For the year ended March 2019, the sector revenue accounted for about 41.2 percent of the total revenue as opposed to 43.3 percent in FY18.

Bhat said that while communication de-grew annually, the company saw healthy growth in the last three quarters. “But if I really look at the quarterly trend, Q1 was a dip, Q2, Q3 and Q4 saw compounded growth rate averaging about 4 percent,” he added.

Bhat attributed this to the dip in spending by the telecom sector in the last 2-3 years and consolidation the sector witnessed.

“I think we are just emerging out of that phase and into a new phase where spends increasing and people are spending money on digital transformation and moving to cloud very aggressively,” Bhat said.

Bhat said, “To me, that is a very positive sign and we are hoping that this momentum would continue next year as well.”

Apart from communications, the company is looking at strong growth from enterprises business as well. Bhat said, the enterprise segment will be on a growth track in FY20 due to increased spending by manufacturers on factory automation, implementation of IoT-based solutions, modernising factory floors and warehousing and logistics.

In terms of geographies, India is a big focus area for the company. Bhat said, “For us, India is the focus market and has been doing extremely well. If you look at constant currency India grew about 20 percent last fiscal.”

Americas account for about 47.2 percent followed by Europe at 29.3 percent and rest of the world at 23.5 percent. The company did not report India-specific revenue figures.

In India, the company works on projects including e-governance, smart city projects, modernisation of the private sector in India including banks and defence modernisation.

The company recently signed a Rs 300 crore defence contract. As part of the 'Armed Forces Secure Access Card' (AFSAC) Project, the company will implement RFID (Radio Frequency Identification) based access control system across all naval bases and ships.

Talking about the deal, Bhat said, “It is a combination of our abilities and some of our latest technologies like RFID tracking and security, making sure that the whole network is secure creating almost identity management system using this technology.”

Going forward, Bhat said defence modernisation is a big focus area for Tech Mahindra. “There is a market that is only growing in size and that is something which is good for the country. From our perspective, we are positioning ourselves to the preferred provider for some of these areas we are focusing on,” he added

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First Published on May 22, 2019 04:34 pm
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