Tech Mahindra’s CEO and MD Mohit Joshi on April 25 unveiled a three-year roadmap to turn around the IT services major’s slowing business, with an aim to drive better revenue growth than peer average and optimising margin improvement by FY27.
As he embarks on to his first full fiscal year as the CEO, Joshi laid down his ‘Vision 2027’ plan to focus on organisational restructuring, phased business improvements and investments, along with utilising synergies with the larger Mahindra Group businesses.
A key differentiator through all this that Tech Mahindra will be trying to perfect is to offer solutions to clients at a better scale and speed as compared to its peers.
According to the plan, Joshi said that the turnaround will be happening in phases based on the fiscal year. So in FY25, Tech Mahindra will be in the ‘Turnaround phase’, wherein the focus will be anchoring the new organisation, investing into key accounts, markets and service lines. At this stage, the work will be to integrate front end portfolio companies, focus on Turbocharge Program for key account growth and starting Project Fortius for cost optimisation.
For Turbocharge Program, the company had identified top 80 accounts where it work to build on further.
“We've got a very clear sense now on faster accounts and what other clients that we need to apply for rather than haphazardly building our portfolio,” Joshi said at the analyst conference on April 25 for the Q4 earnings.
Also read: Inside Tech Mahindra’s restructuring game plan
The company also introduced Project Fortius, a program in which the management will work on multiple levers over the next three years to drive margin growth. Tech Mahindra’s operating margin had hit as low as 4.2 percent in Q2, which improved to 7.4 percent as of Q4.
“We have a lot of scope and are bringing down the average resource cost by consistently progressing on it. I have done it in the past, we have done it in various batches. But now the plan is consistent. That we will continue to work on wage inflation. In the three-year period, we'll be working on developing a robust supply chain system and make sure the learning and development helps enable a better internal fulfillment rate,” said Chief Financial Officer Rohit Anand.
Under Project Fortius, TechM plans to hire, train and continue deploying early career professionals and freshers which will help them manage costs.
FY26 will be the ‘Stabilisation Phase’ for the company, where the investments will continue, and Project Fortius is expected to progress on cost savings.
By FY27, the company expects to start ‘Reaping Returns’ with improved long-term structural mix and continued improvement in pyramid.
The company will further double down on building its telco, manufacturing, BFSI, healthcare and life sciences, and AI verticals.
By FY27, Tech Mahindra has set a goal to expand EBIT margin to 15 percent and have higher topline growth as compared to peer average of top six-seven IT services players.
Key investment areas
Tech Mahindra has also started a Strategic Solutioning and Transformation group, and a new leader will be appointed for this vertical. The group will be looking into winning multi-million dollar large deals.
Joshi said, “To focus on addressing the complexities that we faced in the earlier structure which had to some degree constrained our ability to win multi-dollar large deals because we were operating in geography focused silos. This new structure allows us to bring together multiple service lines to complex engagements.”
The company will be making higher investments in certain areas for long-term profitable growth. These areas include investing in service line capabilities like engineering services, digital enterprise apps, next gen offerings (cloud, AI, consulting capabilities); ecosystem; productivity; sales and key verticals; talent management and key account focus.
Synergies with Mahindra Group
Tech Mahindra in its next phase will utilise its synergies with the larger Mahindra Group companies across sectors, by becoming the primary system integrator and transformation partner. It will also leverage group relationships to expand into its network and co-create, co-innovate with ecosystem partners.
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