Tech Mahindra on May 13 reported a 10 percent sequential rise in its consolidated net profit to Rs 1,506 crore for the quarter ended March 2022, which was above analysts' expectations of Rs 1,411 crore.
The IT services major reported a 5.8 percent quarter-on-quarter rise in consolidated revenue from operations to Rs 12,116 crore for the reported quarter.
The board of the company has also recommended a final dividend of Rs 15 per share for the financial year ended March 31, 2022.
"Our improved growth performance reflects the power of Human-Centered experiences, a strong focus on innovation and our ability to create a strong customer and partner ecosystem," CP Gurnani, managing director and chief executive officer at Tech Mahindra said in a press statement.
Enterprise vertical shines
The 5.4 percent sequential growth in the topline of the company in constant currency basis was driven by the enterprise vertical.
The revenues of the enterprise vertical grew 5.8 percent on-quarter while that of communication vertical rose 4.8 percent in constant currency terms.
The banking, financial services and insurance segments saw a sequential increase in contribution to sales from 15.4 percent in the previous quarter to 17.4 percent in the reported quarter, indicating that it was a major driver of the topline performance.
At the same time, revenue contribution of the bread-and-butter communication and manufacturing segments fell on a sequential basis.
Deals wins remain healthy
For the quarter ended March, Tech Mahindra reported net new deal wins worth more than $1 billion reflecting a strong demand environment.
Of the $3.3 billion of net new deal wins Tech Mahindra reported in 2021-22, nearly a third came in the last quarter of the financial year.
"Tech Mahindra’s commitment towards sustainable digital transformation and investment in new-age technology stacks has resulted in one of the highest growth with large deal wins over the last 7 years," Gurnani said.
Despite the better-than-expected bottomline and topline performance of the company, operating show was muted given the continued impact of higher staffing costs.
Tech Mahindra's consolidated earnings before interest and tax for the reported quarter came in at Rs 1,604.2 crore as against Rs 1,697.9 crore. Analysts had expected the company to report consolidated EBIT of Rs 1,719 crore in the quarter.
The IT services company's consolidated EBIT margin in the quarter shrank 160 basis points on-quarter to 13.2 percent reflecting the impact of higher staffing costs.
However, the company's efforts to retain talent likely paid off in the quarter as the annualised attrition rate stood at 24 percent, unchanged from the previous qaurter.
“Our structural profitability continues to be robust, and we look forward to continuing our journey with commitment to resilient capital return and operational efficiency backed by a comprehensive digital portfolio," said Milind Kulkarni, chief financial officer at Tech Mahindra.On May 13, shares of the company ended 0.6 percent higher at Rs 1,220.6 on the National Stock Exchange.