Software services provider Tech Mahindra's fourth quarter profit is seen falling 1 percent sequentially to Rs 751 crore, according to average of estimates of analysts polled by CNBC-TV18.
Rupee revenue is likely to increase 1.9 percent to Rs 6,831 crore but dollar revenue may be flat at USD 1,014 million compared to preceding quarter.
The Pininfarina acquisition is likely be be completed in April/May and hence will not contribute to Q4 revenue.
Earnings before interest and tax (EBIT) are expected to decline 0.7 percent to Rs 955 crore and margin to fall by 35 basis points to 14 percent compared to Q3.
Analysts say negative impact of wage hike may be offset by margin benefits from a seasonally stronger Comviva, currency tailwind and utilisation improvement. However with utilization ex-trainees are already at a reasonably high point (80 percent), further margin expansion is contingent on correcting the employee pyramid, optimising revenue mix in favour of offshore and payoff from automation efforts.
Key areas of concern:> Softness in telecom (due to the ongoing industry consolidation)> Issues with the recently acquired entity - LCC> Steep margin correction
Street would look for signs of the telecom vertical bottoming-out, margin recovery and attrition rate (which was at 20 percent in Q3FY16 and that has been steadily inching up from 15 percent from 2 years ago).
Telecom vertical contributes 51.3 percent to overall revenue as of December quarter, which segment revenue fell 2.7 percent QoQ.
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