TechM sees 8% drop in net profit

Company's revenue grows healthy 25% to Rs 5,122 cr

Tech Mahindra, India’s fifth largest information technology services company, reported a net profit of Rs 631 crore in the June quarter, a drop of 8.1 per cent from the same period a year before.

The Pune-based company said increase in expenses, primarily because of a rise in visa costs and those associated with the transitioning of large deals, impacted the net profit. Consolidated revenue was Rs 5,122 crore, up 25 per cent over a year.

“Our robust performance sets the tone for rest of the year,” said C P Gurnani, managing director.

“Our customers have shown remarkable appetite for the connectedness revolution and are readying themselves for the disruption in future. Tech Mahindra with telecom as a horizontal differentiator augurs well with the customers in this potentially disruptive landscape.”

Total expenses rose 30 per cent over a year to Rs 4,342 crore, impacting the company’s operating profit negatively on a sequential basis.

Operating profit was Rs 779 crore, down from Rs 928 crore in the preceding quarter and Rs 747 crore in the corresponding period last year. “One-time visa costs, rupee appreciation, hiring and large projects having had transition costs have impacted the operating profit on sequential basis,” said Vineet Nair executive vice-chairman.

The impact of visa costs on the company’s margins has been $8-9 million, while the impact of transition cost from large deals was estimated at $5-6 mn. “The (latter) is expected to have some cascading effect and so we might see some more impact in the coming quarters,” added Nair.

On the hiring front, the company said it has added 3288 professionals during the quarter which pushed up the expenses. The attrition at 16% went up by 100 basis points when compared with the previous quarter.

As on June 30, the company has a debt of Rs 86 crore and has repaid debt of Rs 277 crore in the quarter gone by. "We have a healthy cash position of Rs 3,669 crore though there is some debt that we need to repay," Nair said.

"Going ahead we will continue to focus on maintaining growth, and though the telecom customers remain a bit cautious we are patient. The enterprise segment showed healthy performance and we also grabbed some small contracts in the digital space in the quarter," said Nair.