Tech Mahindra Q1 EBITDA margin expects to grow 230 bps QoQ

By Reema Tendulkar, Research Analyst at CNBC-TV18

Software services exporter Tech Mahindra is set to announce its first quarter numbers of financial year 2012-13 on Thursday. Analysts on an average expect reported profit after tax to grow by 2.7% quarter-on-quarter to Rs 310.73 crore. Profit after tax (excluding Satyam wherein Tech Mahindra holds 42.7% stake) is likely to be at Rs 160 crore as against Rs 74.69 crore in the previous quarter. Revenues (in terms of dollar) are expected to increase marginally to USD 282.5 million from USD 282 million during the same period. But revenues (in rupee terms) are seen going up by 8.4% QoQ to Rs 1,539 crore. Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to go up by 23.3% to Rs 295 crore and EBITDA margin is expected to increase by 230 basis points to 19.16% QoQ. Q1 expectations Financial performance has been weak as its dollar revenues have been declined in last two quarters. Revenues fell by 2.4% in Q4 and 2.4% in Q3. Analysts feel profit after tax look different due to extraordinary items in last quarter at both Tech Mahindra and Satyam. Tech Mahindra had a write off of Rs 68 crore due to Etisalat and forex loss of Rs 34.6 crore in the previous quarter. Better than expected Satyam performance will aid Tech Mahindra's bottom-line. Investors should watch out for a) continued stability at BT (BT retendering process has slowed down, which is positive), and b) non-BT growth (which was down 5.4% last quarter due to telecom impact) that analysts expect to grow during the quarter.