IT major Tech Mahindra is expected to announce a subdued set of Q4FY20 numbers owing to disruption caused by COVID-19, shutdown in China and India, and cancellation of a few network projects.
The company will release its March quarter results on April 30.
A few points to watch out for in the results are - strategy to improve the work from home coverage for BPO work, measures taken to ensure that profitability is higher than FY20 levels, impact on 5G rollouts from the recent chain of events, demand outlook from the impacted auto vertical and large deal pipeline, and drivers of revenue in FY21E, according to brokerages.
Kotak Institutional Equities expects a 21.9 percent year-on-year (YoY) fall and 22.8 percent quarter-on-quarter (QoQ) fall in Tech Mahindra's adjusted net profit at Rs 884 crore for Q4FY20.
The estimates of the brokerage show the EBIT of the company for the quarter may see a 15 percent YoY decline while EBIT margin may fall by 348 bps YoY.
Revenues may rise 9.8 percent YoY to Rs 9,763.8 crore while revenue in constant currency (CC) terms may fall 30 bps YoY, Kotak said.
"We expect a steep net profit decline sequentially due to forex loss against forex gains of Rs 143 crore in December 2019 quarter and decline in EBIT margins," Kotak said.
Motilal Oswal Financial Services expects a 7.7 percent YoY increase in Tech Mahindra's revenues at Rs 9,578.8 crore for Q4FY20. EBIT margin is expected at 11.8 percent while EBITDA margin is expected at 15.9 percent, said Motilal.
As per Motilal, margin commentary, outlook on telecom vertical and progress on deal ramp-ups are key things to watch out for when Tech Mahindra declares its Q4 results.
Brokerage Sharekhan expects a 20.8 percent YoY and 21.8 percent QoQ fall in Tech Mahindra's net profit to Rs 897 crore.
Sharekhan expects revenue to decline by 0.2 percent QoQ on CC basis despite additional revenue contribution from BORN acquisition and ramp-up of Prudential deal.
"The decline in revenue during the quarter is expected due to lower billings in BPO (10 percent of its total revenue), a drop in AT&T revenue, decline in Pininfarina revenue, China shut-down, and cancellation of few network projects. Further, the cross-currency headwind is expected around 110 BPS on its dollar revenue," Sharekhan said.
As per Sharekhan's estimates, EBIT margin is expected to decline by about 21BPS QoQ, owing to transition costs of large deals, lower billing and decline in utilisation.
On the other hand, ICICI Direct expects Tech Mahindra's dollar revenues to grow 1 percent QoQ to $1,367 million mainly driven by partial contribution by the acquisition of Born group, AT&T deal and Jackson National Life Insurance deal.
Rupee revenues may grow 2.6 percent QoQ to Rs 9,903 crore. EBITDA margins could decline 50 bps QoQ to 15.7 percent on account of the continuity of large deal transition cost in the quarter partially offset by rupee depreciation, ICICI Direct said.
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