India’s fifth largest software exporter Tech Mahindra posted fourth quarter earnings that came in line with analyst expectations but its margins fell short of estimates, due to higher employee expenses and lower utilisation.
It ended fiscal year 2021-22 with a double digit revenue growth of 17.3% and expects the momentum to continue going forward.
“We believe this is the best performance in terms of growth we have had in seven years. 17.3% YoY growth reflects our commitment to guidance, employees, and the value that we create for the customers,” said CP Gurnani, Managing Director & Chief Executive Officer, Tech Mahindra said.
Its net new TCV (total contract value) for the quarter came in at $1.01 billion, up 44% quarter-on-quarter (QoQ), signaling a strong pace of deal making.
It also made a couple of management related announcements. While Gurnani’s term has been extended till December 2023, Rohit Anand has been appointed CFO, taking over from Milind Kulkarni.
While software firms have seen robust growth in the last fiscal on the back of post-pandemic digitisation and migration to cloud, attrition is a niggling concern, as companies step up hiring of technology talent.
For Tech Mahindra, its attrition rate stood at 24 percent, unchanged from the previous quarter. The total headcount stood at 151,173, up 4.2% QoQ, with the company adding 6,106 net employees during the quarter.
The company had earlier said it was looking to make 15,000 campus hires in 2022-23, up from 10,000 in the last financial year, to keep pace with rising demand and attrition.
“We have invested heavily on people. We have also invested in tier two cities and opened 15 new centers. Our global delivery centers have also gone up to at least four new ones in Latin America and another four in Europe,” Gurnani said.
Communication, Media and Entertainment (CME), one of its strongest businesses, grew well thanks to the demand for 5G telecom services.
“We have seen large deal wins as clients have started to roll out 5G networks and commercialize them,” Anand said.
Tech Mahindra said it won a strategic deal for building & operating Europe’s first fully cloud-native end-to-end 5G network augmenting & operating network data centres, labs & the security infrastructure.
Secondly, within the media and entertainment vertical, the company has seen a strong uptake in the Metaverse offerings. “We're looking at that as a big growth opportunity,” Anand said.
The BFSI (Banking, financial services and insurance) too posted strong growth, with the vertical crossing a billion dollars in run rate for the first time.
“CME was always the Northstar, it is doing very well. But I’m happy that BFSI joined the billion-dollar club,” added Gurnani.The company also indicated that the demand scenario remains robust across industries and markets despite a potential worry about inflation and the geopolitical situation.