Tech Mahindra faces series of downgrades in a challenging quarter

According to Moneycontrol's Analysts' Call Tracker, the number of "buy" recommendations for the IT company has dropped from 22 to 15

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26 Aug, 2025 12:21

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Tech Mahindra Ltd has suffered a spate of downgrades with the number of 'buy' calls for the stock down from 22 to 15 over the last one month. There are 13 hold calls and 15 sell calls at present as against 13 holds and nine sells a month back.

The abrupt downgrades are attributed to recent weak earnings with the management highlighting this quarter as one of the most challenging in the past five years. The lacklustre performance is attributed to factors such as project closures, a single customer declaring bankruptcy, reduced 5G expenditures from enterprises, and seasonal variations impacting Comviva's business.

The management anticipates a gradual recovery, driven by improved operational efficiencies, enhancements in the Pyramid mix, and ongoing discussions with customers regarding new transformative projects.

This decline coincides with a challenging business landscape for IT companies as major firms are revising down their growth projections.

Tech Mahindra saw a sequential revenue drop of 4 percent, amounting to $1600.7 million. In constant currency terms, revenue fell by 4.2 percent, marking the sharpest decline among its peers. Similar revenue declines were observed for Wipro and HCL Tech during this quarter. Net profit reported a 38 percent on-year decrease, totaling to Rs 692.5 crore.

As the new CEO, Mohit Joshi, steps in, analysts turn more optimistic while acknowledging the substantial challenge of reinvigorating the company's growth and margins. The strategies he deploys will require time to translate into earnings, which might lead to the company's stock lagging behind its peers.

Joshi is likely to address medium-term growth and margin concerns, currently undergoing a transition with outgoing predecessor CP Gurnani. His approach is expected to encompass a cost-efficient operational structure, increased revenue from the BFSI sector, and lucrative high-margin deals. Detailed plans are slated for unveiling within the next two quarters.