Vibhor Singhal of Phillip Capital told CNBC-TV18, "We have downgraded our estimates both for FY16 and FY17. So, our EPS estimates are down by around 12-15 percent. We have also downgraded Tech Mahindra from buy to neutral rating. We now have a price target of Rs 590 on the stock. We believe concerns are more on the margin front for the company than the growth front, 15.2 percent margins were way off the estimates that we were expecting."
"However, more importantly if you hear the management commentary and the call, the integration of Lightbridge Communications Corporation (LCC) which they acquired last year in November is going to take some time. So, the margins for LCC are also down from the usual 7-8 percent to around 2.5 percent in this quarter. They also had a lot of integration cost which the management believes will continue for the next couple of quarters," he added.
''We believe it is going to be very difficult for the company to ramp up the margins from where they are currently in Q4 to significant levels of upside. That compares with the entire theory that basically when LCC was acquired the company will be able to do more off shoring and ramp up the margins from 7-8 percent to maybe 12 percent levels. So, that remains a big concern on the stock."
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