Tech Mahindra Q1 profit falls 25% sequentially to Rs 1,132 crore, revenue grows 5%

The consolidated revenue for the quarter jumped 24.6 percent from Rs 10,198 crore achieved during the same period last year.

“We are starting this fiscal with a renewed commitment towards delivering consistent organic growth and we remain resilient and watchful given the dynamic global macro-economic environment and will continue to invest in new and emerging technologies to deliver differentiated offerings”, said CP Gurnani, Managing Director & Chief Executive Officer, while commenting on the performance for the quarter.

Typically, Q1 is seasonally a weak quarter for the company due to weakness in its telecom business during the period.

“Delivery transformation, cost optimization and cash conversion will be key focus areas, as we continue to offset the strong supply side headwinds in the market," said Rohit Anand, Chief Financial Officer. “We aim to expand our profitability through operational excellence and improved operating metrics over the course of FY23.”

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Revenue in Constant Currency

The total revenues of the company in dollar terms came in at $1,632 million with a reported growth of 1.5 percent on a sequential basis and 3.5 percent in constant currency terms. On a yearly basis, the reported growth in dollar revenues stood at 18 percent while the yearly growth in constant currency was 21.2 percent.

Revenue by business verticals

Communications, media and entertainment vertical continue to be the mainstay of the company as it contributed 40.4 percent of the total revenues for the quarter, registering a healthy YoY growth of 19.1 percent and sequential growth of 1 percent.

15.3 percent of the total revenues came in from the Manufacturing industry as it achieved a growth of 8..9 percent on year and 3.9 percent on quarterly basis.

Technology business contributed 9.7 percent of the revenues and witnessed the highest YoY growth of 30.3 percent and a sequential growth of 6.4 percent.

BFSI (banking, financial services & insurance); Retail, Transport & Logistics and others contributed 16.7 percent, 7.9 percent and 10 percent to the quarterly revenues while registering healthy double digit growth on yearly basis.

Geographical distribution

America generated 49.6 percent of the company’s revenues with a YoY growth of 25.6 percent and a sequential growth of 4.4 percent. Europe’s share in revenues dipped marginally to 25.5 percent from 27.2 percent in the same period a year ago. Europe grew by 10.7 percent on year but dipped 1.9 percent on quarter.

Share of Rest of World also dipped marginally on year from 26.1 percent last year to 24.9 percent during the reported quarter. The revenues from the region grew 12 percent on year and dipped 0.4 percent from previous quarter.

Margins

The increase in employee costs, travel expenses and supply side pressure continue to haunt the company as its EBIT (earnings before interest and tax) margins for the quarter dipped 220 bps QoQ to 11 percent. On a YoY basis, the EBIT margins have contracted by 420 bps.

Deal Wins and Client Metrics

The new deal TCV (total contract value) for the quarter stood at $802 million as compared to $815 million during the same quarter last year.

The number of active clients for the company at the end of the quarter stood at 1,262 compared to 1,224 at the end of March quarter and 1,058 clients during the same period a year ago.

Tech Mahindra had 23 clients in the $50-million-plus category, 60 clients in $20-million-plus basket, 104 in $10-million-plus,176 in $5-million-plus and 549 clients in $1-millionplus basket.

Headcount & attrition

The LTM (last 12 months) attrition for the company stood at 22 percent during the quarter compared to 24 percent during the previous quarter and 17 percent during the same period last year. The total resources stood at 158,035 at the end of the quarter while the utilization percentage 83 percent.

The stock has corrected around 44 percent from its all-time high in December 2021. It has seen some recovery lately but stills remain range bound. On July 25, it ended Rs 11.45 lower at Rs 1,017.25 on The National Stock Exchange.