Tech Mahindra has announced plans to roll out wage hikes in the January-March quarter after delaying them for most of the fiscal year. The rollout of wage hikes will also have a negative bearing of around 1-1.5 percent on the company's operating margins in Q4, the management revealed in the post-earnings call.
“As we look at our journey toward improving operating margins, as demonstrated in the last quarter, we are encouraged by the programs we are running across the organisation and remain confident of continued expansion in future quarters,” said Mohit Joshi, CEO of Tech Mahindra, during the call.
The market had been closely monitoring Tech Mahindra’s wage hike plans ahead of its results announcement. With the rollout now scheduled for Q4, the company aligns with peers like Infosys, which delayed wage hikes the most in the sector. In comparison, Tata Consultancy Services implemented its wage hike in Q1, followed by HCLTech in September. Wipro followed suit in Q3, while Infosys opted for a phased approach, with hikes on January 1 and April 1.
The delay in wage hikes across the IT sector in FY25 was largely attributed to a weak macroeconomic environment and earnings pressure. However, as demand conditions improved throughout the year, companies began implementing their delayed hikes.
A significant concern for investors regarding Tech Mahindra’s wage hikes has been its impact on operating margins. However, the company’s cost optimisation initiative, Project Fortius, appears to be progressing well. Coupled with a focus on high-priority deal wins, the management remains confident in mitigating the adverse effects of wage hikes on margins.
Despite the company’s net profit and revenue missing Street expectations, its Q3 margin improvement surpassed forecasts. EBIT margins rose 60 basis points sequentially to 10.2 percent, exceeding Moneycontrol’s estimate of 10 percent.
On January 17, Tech Mahindra shares closed 1.81 percent lower on the BSE at Rs 1,658.85.
Also Read | Tech Mahindra Q3 results: Net profits jumps 92% YoY to Rs 983 crore, revenue up 1.4%
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