Tech Mahindra Q2 net declines 5.3% to Rs 1,064 cr on higher expenses

IT services company Tech Mahindra on Friday reported a 5.3 per cent decline in net profit at Rs 1,064 crore in the September quarter (Q2FY21) on a year-on-year (YoY) basis owing to higher employee costs and other expenses. However, on a sequential quarter basis, the net profit grew 9.5 per cent.

Revenue for the quarter stood at Rs 9,372 crore, a growth of 3.3 per cent YoY and 2.9 per cent sequentially. The dollar revenue at $1,265.4 million, saw an increase of 2.9 per cent QoQ in constant currency terms. The Pune-headquartered firm expanded its operating margin by 390 basis points to 18.2 per cent on QoQ basis.

The numbers reported by the company were ahead of the Street’s expectations on the profit and revenue fronts. Centrum Broking expected Tech Mahindra to deliver constant currency revenue growth of 1.6 per cent QoQ. Net profit was seen at Rs 958.2 crore, down 1.5 per cent QoQ and 14.7 per cent YoY.

“Tech Mahindra reported strong set of numbers beating on all fronts, with decent deal wins and strong free cash flow generation,” said Sanjeev Hota, Head of Research, Sharekhan. “EBIT margin performance surprised us positively with a strong sequential expansion of 413 bps, exceeding our estimates, led by higher offshoring and operational efficiencies.”

The net new deal wins stood at $421 million for the quarter. The company said it had reached pre-Covid-19 levels. The board has declared a special dividend of Rs 15 per share and November 2 has been fixed as the record date.

“We are witnessing demand revival across multiple segments, as customers have accelerated their pace of digital transformation. Our focus on creating human-centered experiences will enable us to capture increased spends on consumerisation, as businesses try to stay relevant in the current environment,” said CP Gurnani, MD and CEO, Tech Mahindra.

The headcount stood at 124,258 at the end of the second quarter, up by 842 employees compared to the June-ended quarter.

The company said that salary hikes and appraisals for FY20 will be given in two tranches. While the junior-level employees will be given a salary hike in the ongoing financial year, senior employees will be paid in CY2021.

Highlights 

-Firm to offer salary hike to junior employee in ongoing fiscal

-Says, demand back to pre-Covid level in most segments

-Surprises healthy rise in profitability by over 400 bps

-Declares interim dividend of Rs 15/share