Tech Mahindra Q1 net profit up 6.8% to Rs 959 crore, revenue rises 4.6% YoY

Pune-headquartered software firm Tech Mahindra (TechM) missed the Street estimates for the June quarter as it reported revenue earnings of Rs 8,653 crore, up 4.6 per cent year on year (YoY) and down 2.6 per cent sequentially. Profit after tax (PAT) was Rs 959 crore, up 6.8 per cent YoY and down 15 per cent over the quarter. 

Analysts had estimated a seasonal impact on the communication vertical to affect revenues by up to 2 per cent on a sequential basis and 5 per cent over the year. Profit estimates were factored to dip 6.6 per cent over the quarter and grow 9 per cent YoY.

In constant currency terms, revenue grew 3.7 per cent while Ebitda (earnings before interest, tax, depreciation and amortisation) slipped 320 bps YoY to Rs 1,314 crore. Operating margins came in at 15.2 per cent, down 120 basis points (bps) YoY and 320 bps QoQ.

“The communications (vertical) business was down 3.2 per cent over the quarter due to seasonality in mobility business and it was flat minus the seasonality in constant currency basis. The overall deal pipeline is robust and larger than what we had in the previous year,” said C P Gurnani, chief executive officer and managing director, TechM. He, however, remained optimistic about communication.

Health care was among the few businesses that remained robust in the quarter while manufacturing and BFSI took a hit. Ebitda was impacted by 100 bps each due to mobility slowdown as well as wage hikes. Visa costs and currency headwinds continued to weigh in on the margins as well as about 70 bps impact on forward looking investments.