Tech Mahindra has reported a robust $534 million in total contract value (TCV) for Q1 FY25, driven by major deals in the US, Europe, and key APAC regions. The deal wins spanned digital enterprise applications, cloud and infra, and next-gen services, the company said. June quarter's TCV of $534 million marks an increase from $500 million in the previous quarter and $359 million in the same period last year.
Vertical Performance
Excluding the communications vertical, all other verticals - manufacturing, hi-tech and media, BFSI, Retail, transport and logistics, and Healthcare and life sciences saw a quarterly increase in revenue.
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The communication vertical, the major differentiator and key contributor to Tech Mahindra's revenue saw a quarterly decline of nearly 2 percent and an annual decline of nearly 10 percent. "This was a seasonally weak quarter for our communications vertical partly due to decline in revenue from Comviva business, which picks up in the second half of the year," Mohit Joshi, CEO and MD of Tech Mahindra said in the post-earnings press conference.
In the BFSI (Banking, Financial Services, and Insurance) sector, Joshi reported notable developments, including the addition of new clients and opportunities within existing accounts. He said that although there were improvements in areas such as asset and wealth management, cards and payments, retirement, risk and compliance, and insurance there was some softness in investment banking and lending businesses.
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"We are benefiting from having a new team and a focused approach on the BFSI vertical," Joshi said. "The gains that we are seeing are mostly based on our internal efforts and our improved market positioning."
Geographical Revenue Breakdown
The revenue generated from the Americas accounted for 52.4 percent of Tech Mahindra's Q1 FY25 revenue. This was an improvement from the previous quarter's 50.8 percent. Europe and the rest contributed 23.4 percent and 24.2 percent to Tech Mahindra's revenue.
Demand Stability
Joshi said that the demand environment was reasonably stable. "I don't think there is any significant improvement, nor has there been a deterioration".
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Joshi expects that a potential pickup in demand could positively impact margins, provided other factors such as attrition remain stable. "If the demand environment improves significantly in the second half of the year, it will be beneficial from a margin perspective," he said.
Tech Mahindra's EBIT margin or operating margin came in at 8.5 percent in Q1 FY25, which is an improvement of 110 bps from the previous quarter's 7.4 percent. This was above Moneycontrol’s estimate of 8 percent.
Going by Tech Mahindra's Vision 2027 to turn around the business, it has set a goal to expand its EBIT margin to 15 percent by 2027.
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