Tech Mahindra’s revenue from 5G solutions may touch $1 billion in FY23

Manish Vyas, President, Communications, Media & Entertainment and CEO, Network Services, Tech Mahindra

Tech Mahindra is on track to touch almost $1 billion in revenue from 5G solutions alone in FY23 as India’s fifth-largest software exporter continues to see strong momentum, a top executive said.

Revenue from 5G solutions jumped almost fivefold to over $600 million in FY22 from $125 million in FY21 as the company benefited from the wider adoption of the faster mobile communications standard.

“5G continues to be a strong growth engine for us,” Manish Vyas, CEO of network services at Tech Mahindra, told Moneycontrol after the company’s second-quarter earnings. “I don't want to steal the thunder from the full year, but as of now, I think we are well on our way to be very close – if not exactly that number – close to a billion dollars.”

Earlier this year, the management said 5G would be a key deal enabler in FY23. Tech Mahindra’s performance for the second quarter was in line with analyst estimates for most aspects, including revenue and margins, though the total contract value of deals at $716 million was slightly muted on both year-on-year and quarter-on-quarter basis.

The company reported a 4 percent year-on-year fall in consolidated net profit to Rs 1,285 crore for the quarter ended September. Revenue from operations rose 20.6 percent year-on-year to Rs 13,129.5 crore.

Overall, Vyas expects around 35-40 percent YoY growth this year from the segment.

Vyas said 5G is a more comprehensive transformation and innovation play.

Across verticals

“And we have taken 5G exactly like that. In fact, we don’t even spend any time where the most money gets spent, which is deploying the network. We’ve stayed away from that as much as possible because we need to balance our growth with our margins and our strengths,” he added.

Tech Mahindra has been working around network integration, network management, network automation, closed-loop automation, and digital platforms that will enable 5G and 5G engineering on devices. The company is also working on value-added services with enterprises on 5G.

Tech Mahindra’s 5G play is across industrial verticals and use-cases. They include enabling smart factories and equipment management on shop floors, post-sales services for manufacturing companies, and for oil and sector, it could be repair work, asset management, and solving oil rig issues to name a few.

In terms of deals for 5G solutions, Tech Mahindra is focussed on higher volumes of mid-sized contracts in the range of $25-50 million.

“Because of the kind of areas we want to focus on, it is more voluminous, but it is going to be mid-size deals in overall deal flow. I also think we will probably start seeing larger deals again coming back into the funnel because every time the economy tightens, there is a greater opportunity to do more costing,” Vyas said.

On metaverse projects

Last quarter, Tech Mahindra CEO CP Gurnani said the company was working on about 60 metaverse projects. But given the inflation and recessionary pressures that followed, many client companies of IT firms are rethinking their technology budgets and reprioritising their spending. Futuristic technologies in exploratory stages such as the metaverse have borne the brunt of such cutbacks.

Vyas remains bullish on the deal pipeline and long-term prospects of the metaverse, a virtual shared space that is seen as the next level for interaction for companies and consumers.

“The speed at which we have seen actions on metaverse is amazing. It's better than anything in the past. We are very busy. What is emerging is the metaverse relevance to business versus consumers,” Vyas said. “I think we’d have to wait for a few more months, maybe a few quarters, before a little realisation happens. There will be a few people who will say maybe let’s focus on next year rather than the long-term future. In which case some of the metaverse discussions may – I'm not saying they will – they may probably take a little re-prioritisation, but overall, I think it will remain very strong.”