Tech Mahindra Limited, one of India’s top five IT services providers, on October 25 reported a consolidated profit after tax (PAT) of Rs 1,339 crore for the quarter ended September 2021, down 1.1 percent from Rs 1,353 crore registered in the previous quarter.
On a yearly basis, the profit witnessed an increase of 25.8 percent from Rs 1,065 crore.
Topline Growth and segmental performance
Consolidated revenue came in higher by 6.7 percent at Rs 10,881 crore for the quarter, compared to Rs 10,198 crore in June 2021 quarter. On a year-on-year (YOY) basis, the revenue was higher by 16.1 percent from Rs 9,372 crore reported in the same quarter last year.
Revenue from IT services stood at Rs 9,576 crore, an increase of 6.2 percent on a sequential basis from Rs 9,016 crore logged in the previous quarter. On a YOY basis, it increased by 13.7 percent from Rs 8,419 crore.
US dollar revenue stood at $1,472.6 million which is a growth of 6.4 percent on QOQ and 16.4 percent on a YOY basis.
In constant currency terms, the revenue grew by 7.2 percent on a sequential basis.
BPO business contributed Rs 1,306 crore, an increase of 10.5 percent from Rs 1,189 crore reported in the previous quarter and an increase of 37.1 percent from Rs 953 crore reported in the same quarter last year.
Commenting on the company’s performance for the quarter, CP Gurnani, Managing Director & Chief Executive Officer, said, “We remain committed to delivering long-term sustainable and profitable growth for the company. We have witnessed strong traction across all key markets as we invest in our digital capabilities through strategic partnerships”.
Industry and geographical growth
Communication, Media, and Entertainment (CME) business witnessed 6.7 percent QOQ growth while Enterprise business grew by 6.3 percent. Within Enterprise business, all verticals grew by more than 6 percent except Manufacturing which delivered a growth of 3 percent on a quarterly basis.
Americas contributed 47.8 percent of total revenues and grew by 8.9 percent QOQ, Europe contributed 25.9 percent and grew by 1.6 percent while ROW contributed 26.3 percent to total revenues and delivered a sequential growth of 7.0 percent.
Employee Cost Pressure
Supply-side pressures in terms of hiring and talent retention caused the employee cost to rise 5 percent on a sequential basis and by 12.2 percent on a yearly basis.
The subcontractor’s cost was also on a northward trajectory as has been witnessed across the industry and was higher by 10.5 percent on a sequential basis and by 36.5 percent on a YOY basis.
EBIDTA and Margins
EBITDA for the company stood at Rs 1,995 crore, growing by 6.3 percent on a QOQ basis from Rs 1,876 crore and by 17.2 percent on a YOY basis from Rs 1,703 crore.
Net margin for the company declined by 100 bps on a sequential basis to 12.3 percent and increased by 90 bps on a yearly basis.
Milind Kulkarni, Chief Financial Officer, commented, “Our strong execution has ensured that we maintain our profitability margins while accelerating growth momentum.”
He further stated, “We remain committed on the operational excellence journey we have boarded, and continue to create value to shareholders through efficient capital return.”
New Deal Signings
The company signed new deals worth $750 million compared to $815 million in the previous quarter and $421 million in the corresponding quarter last year. Of this, $255 million worth of new deals were signed in CME business while Enterprise business signed deals worth 495 million in this quarter.
65 new clients were added by the company in this quarter taking the number of active clients to 1,123.
Gurnani added, “We continue to accelerate our clients’ digital journey by creating Human Centric Experiences, helping them gear up for tomorrow, today."
Acquisition
The company announced the acquisition of Lodestone, a leading digital engineering quality assurance provider for new-age digital companies.
Commenting on this acquisition, Vivek Agarwal, President — BFSI, HLS and Corporate Development, said, “The acquisition of Lodestone is in line with our strategy to strengthen digital capabilities and provide enhanced and comprehensive transformation services to our customers globally. This will bring significant synergies to complement our domain expertise and will help drive growth going forward”.
Headcount & Attrition
The employee strength of the company at the end of the September quarter stood at 141,193 and the company added 14,930 new employees on its rolls in this quarter.
LTM attrition for the quarter stood at 21 percent while the utilisation levels were at 87 percent (incl trainees).
Cash Flow
The company generated a free cash flow of $188 million at a conversion of 103.8 times PAT. Cash and cash equivalent stood at $1,626 million at the end of the quarter.
Dividend
The company declared a special dividend of Rs 15 per equity share of Rs 5 each. The special dividend shall be paid on Monday, November 22, 2021, with a record date of November 5, 2021.
The stock closed at Rs 1,524.1 today, up Rs 6.65 from its previous day’s close. It has generated returns of 80 percent over the past 1 year, 57 percent in this financial year, 35 percent during the last 3 months, and has been flat in the past one month.
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