IT services company Tech Mahindra is expected to report 2-3 percent sequential growth in dollar revenue and 1.5-2 percent QoQ growth in constant currency for the quarter ended March 2021 due to the weak new deal signings in the past nine months.
Brokerages now largely expect better deal wins for the March quarter.
The stock has fallen 2.4 percent in the current calendar year so far, underperforming Nifty IT index that gained 5.6 percent in the same period.
"We expect modest 1.8 percent sequential growth on constant currency basis and 1.4 percent on organic basis. Muted revenue growth is not a surprise and follows weak new deal signings in the past nine months," said Kotak Institutional Equities which expect net-new total contract value of around $800 million powered by Telefonica deal and reasonable momentum in enterprise deals.
According to ICICI Direct, Tech Mahindra is expected to witness 3.0 percent QoQ growth in dollar revenues led by healthy traction in communication & enterprise segment and cross currency tailwind. However, due to rupee appreciation, rupee revenues are expected to grow 1.8 percent QoQ, the brokerage feels.
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At the operating levels, Kotak expects stable EBIT margins given seasonal strength in Comviva and lack of apparent margin headwinds.
The brokerage feels Tech Mahindra is running a risk by deferring wage revision at a time when demand for talent is heating up. Hence, attrition rate is the key metric to watch for.
Key things to watch out for - FY22 revenue and margin outlook, deal pipeline in telecommunication & enterprise segment, 5G opportunity and the likely timeframe when it will flow in, enabling factors required to bring consistency to performance, attrition rates noting that the company has been harsher than peers in cutting variable compensation, capital allocation, and quantum of wage hikes.
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