Tech Mahindra Q2 meets forecast, net up 4.7% to Rs 718 cr

Moneycontrol Bureau

Country's fifth largest software services exporter Tech Mahindra matched expectations with the second quarter consolidated net profit growing 4.7 percent sequentially (up 57.6 percent on yearly basis) to Rs 718 crore, impacted by forex loss and lower other income.
Consolidated revenue, which was announced after market hours, jumped 16.3 percent quarter-on-quarter (up 35.4 percent year-on-year) to Rs 4,771 crore in three-month period ended September 2013, which was higher compared to its peers.
"The winning trio for us this quarter - growth across verticals, regions and practices reflects the Tech Mahindra’s new found energy and alignment to win large deals, as well as participate with customers in their transformation journey," C P Gurnani, managing director and CEO said.
Its sequential dollar revenue growth of 4.7 percent (17.6 percent Y-o-Y) was better compared to peers Infosys (3.8 percent), HCL Technologies (3.5 percent) and Wipro (2.7 percent), but lower than TCS (5.4 percent).
Tech Mahindra's dollar revenue increased to USD 758 million from USD 724 million on sequential basis.
According to a CNBC-TV18 poll, analysts had expected the IT company to report net profit of Rs 727 crore on revenues of Rs 4,666 crore for the quarter.
In fact, all IT companies reported strong earnings in the quarter gone by, owing to rupee depreciation and recovery in the US and Europe.
"Europe is looking better. We are seeing greater traction in Australia and Africa," the company's management said in its press conference.
Revenues from European market grew 6.8 percent during September quarter while US and rest of world rose 1.5 percent each, quarter-on-quarter. Media and entertainment technology segment saw 3.8 percent growth while BFSI segment witnessed 5.5 percent and telecom 2.7 percent sequential growth.
Tech Mahindra reported consolidated forex loss of Rs 26 crore during second quarter as against gain of Rs 134 crore in first quarter. Other income dropped significantly to Rs 38 crore from Rs 207 crore quarter-on-quarter, which included forex loss of Rs 26 crore.
Earnings before interest, tax, depreciation and amortisation surged 28.6 percent Q-o-Q (up 46.8 percent Y-o-Y) to Rs 1,111 crore and operating profit margin expanded 215 basis points on sequential basis to 23.2 percent. Operational performance was better than analysts' expectations of Rs 1,080 crore and 23.14 percent, respectively.
Tax expenses jumped 22 percent Q-o-Q to Rs 284 crore in the quarter gone by.
The software firm added nine clients during the quarter, including one client of USD 20 million and 2 clients of 10 million each. Active clients increased to 576 in Q2FY14 from 567 in Q1FY14.
The attrition rate was higher at 16 percent during second quarter as against 15 percent in previous quarter while utilisation rate declined to 75 percent as against 76 percent Q-o-Q.
Vineet Nayyar, executive vice chairman of Tech Mahindra said, “The Digital World is the next phase of company's growth."
The company reduced its debt by Rs 412 crore to Rs 335 crore as of September 30.
Tech Mahindra's stock closed at Rs 1,580.20 on the BSE, up 0.46 percent amid hefty volumes after hitting more than six-and-half-year high of Rs 1,605 in intraday trade.