IT services major Tech Mahindra reported a 60.6 percent fall in net profit to Rs 510 crore year-on-year for the third quarter ended December 31, in a seasonally weak quarter as slowdown in demand continues in key verticals including hi-tech, telecom and financial services.
YoY net profit was significantly below Moneycontrol’s estimate of a decline of 41 percent YoY touching Rs 763 crore. Sequentially, net profit was up by 3 percent.
Consolidated revenue for Q3FY24 declined 5 percent YoY at Rs 13,101 crore, largely in line Moneycontrol’s estimate of Rs 12,957 crore. On a QoQ basis, revenue grew by 1.8 percent.
The company’s EBIT margin or operating margin came in at 5.4 percent, which is an improvement/ worse than the previous quarter’s 4.7 percent. This was a significant miss from Moneycontrol’s estimate of 7 percent.
"The quarter was a mixed outcome, with growth in the manufacturing and healthcare segments but muted spending in areas like communications, BFSI, and hi-tech. While this dichotomy in the markets will take its own time to settle, we are focusing internally on realigning under the new structure and strengthening the foundations of our organisation," Tech Mahindra's chief executive officer and managing director Mohit Joshi said.
"We are encouraged by the robust cash conversions this year, and we hope to continue this rigor in other operational areas as well," Rohit Anand, the company's chief financial officer, added.
On the slower margin uptick, Joshi explained, "These numbers (margins) are the outcomes of actions that we have taken to de-risk the portfolio. Once you adjust for these exceptional items, the operating margin stands at about 7 percent."
The deal total contract value (TCV) stood at $380 million, down from $640 million in the last quarter.
This is the first quarter since new CEO Mohit Joshi completely took over reins of the company from former CEO CP Gurnani. To turnaround the business, Joshi restructured the organisation and the leadership team, which came into effect on January 1.
The company’s focus is currently to diversify more into other segments including BFSI (banking, financial services and insurance) and healthcare and lifesciences. At present, nearly 40 percent of the company’s revenue comes from the Communications, media and entertainment (CME) business.
In Q3, CME growth declined by 13.4 percent YoY, Technology was down by 3.3 percent YoY, BFSI declined by 7.8 percent and retail, transport & logistics plunged 4.2 percent. Manufacturing business growth was up by 8.7 percent.
Speaking on the recovery outlook, Joshi said, "The consensus seems to be that the second half of the calendar year is when people will start to see recovery."
"I don't think the recovery will be simultaneous across geographies and sectors," he added. Joshi believes that BFSI and healthcare will start seeing green shoots over the next six to nine months.
Tech Mahindra closed at Rs 1,407.75 apiece on the BSE, up 3.09 percent from the previous day.
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