Tech Mahindra posts Q2 revenue growth of 5.1% at Rs 9,070 cr, PBT down 7.5%

Pune-headquartered Tech Mahindra on Tuesday reported that it had beaten Street estimates, with its revenue growing to Rs 9,070 crore in the July-September (Q2) of 2019-20 (FY20), a 5.1 per cent rise year on year (YoY). Its profit before tax (PBT), however, was down 7.5 per cent to Rs 1,337.7 crore YoY.

A strong digital growth and new deals, however, helped it clock 5.6 per cent YoY growth in profit after tax (PAT) to Rs 1,124 crore. In the June quarter, the company had missed estimates to report revenue earnings of Rs 8,653 crore and PAT of Rs 959 crore. 

On a quarter on quarter (QoQ) basis, the firm’s revenue grew 4.8 per cent and PAT grew 17.2 per cent. Bloomberg had estimated 3.3 per cent YoY revenue growth and 12.3 per cent dip in net income. Earnings before interest, tax, depreciation, and amortisation (Ebitda) stood at Rs 1,500 crore, while the Ebidta margin was reported at 16.5 per cent, up 130 basis points. Sources said overall efficiency and lower visa costs helped the numbers. 

In dollar terms, the company’s profit was at $158.6 million, while revenue was $1.28 billion in the Q2FY20.“We had indicated in Q1 that we were in the closing stages for a few large deals and it has been a record quarter for deal wins. We saw broadbased revenue growth across all geographies,” said C P Gurnani, managing director and chief executive officer, Tech Mahindra. During the quarter, the company signed a six-and-a-half-year agreement with AT&T to expand strategic collaboration, accelerating the latter’s IT network transformation, shared services modernization, and movement to the cloud. 

This deal comprised over $1 billion. The total contact value reported during the quarter was $1.49 billion. Revenue flow from this deal will start by Q4FY20, said the management of the company. However, the deal wins will also come with transition costs, they said. The company also announced the acquisition of BORN Group, an integrated agency headquartered in the US, to bolster capabilities in commerce and customer experience (CX). BORN Group offers end-to-end digital engagement for $95 million. The company will also in-source all 1,000 employees. 

Manoj Bhat, chief financial officer, Tech Mahindra said, “Except for manufacturing, growth has been good. Europe was flattish because of a currency impact. Our tax rate was slower because of a large tax refund this quarter of about 17 per cent while it is usually around 26 per cent.” The management said all transition costs from these deal wins will be completed in the next two quarters and they have already started the processes. 

Total headcount stood at 131,522, up by 5,749 QoQ, largely led by BPO services while software headcount reduced. Attrition remained at a high of 21 per cent while employee utilisation also remained high at 83 per cent.