Tech Mahindra surprises Street with better Q2 numbers

Net profit rose 9% to Rs 786 cr while revenue grew 20% to Rs 6,616 cr

Tech Mahindra on Tuesday reported revenue and net profit above Street expectations. The good show was supported by operational efficiency and dollar-rupee conversion gains, along with better business from the US.

During the quarter, the country’s fifth largest information technology services company reported a net profit of Rs 786 crore, 9.2 per cent higher than same period last year. Revenue stood at Rs 6,616 crore, reflecting a growth of 20.5 per cent when compared with the year-ago period. On a sequential quarter (compared with the trailing quarter) basis, net profit grew 5.1 per cent, while revenue saw a growth of 16.2 per cent.

According to Bloomberg consensus estimates of analysts, Tech Mahindra was expected to report a revenue of Rs 6,582 crore and net profit of Rs 726 crore for the quarter.

The company derives more than half its revenue from the telecom segment and expects the decision-making process as well as budgets of companies operating in this segment to remain low in time to come, which could impact its revenues.

Quarterly revenue in dollar terms for the first time touched $1 billion, 2.2 per cent higher than the previous quarter and three per cent higher in terms of constant currency, while operating profit crossed Rs 1,100 crore.

The management expressed satisfaction over the performance and said it would continue to look for profitability with a cautious optimism.

“Profitability is going to be a gradual journey. Over the next 12-18 months, we will continue to look at improving yield from acquired companies. We will continue with automation,” managing director and chief executive C P Gurnani said, while announcing the results.  The company’s utilisation of human resources, including trainees, went up to 77 per cent, up from 74 per cent seen in previous quarter.

"The rise shows that we had some headroom to improve utilisations and we did that. We will continue to do so whenever there is a possibility to increase utilisation, but it cannot be beyond 80 per cent," said Vineet Nayyar, executive vice chairman of the company.