Tech Mahindra net dips 6 pc as acquisitions eat into margins

The fifth-biggest software exporter Tech Mahindra today posted a 5.7 per cent decline in December quarter net at Rs 759.2 crore, pulled down by a margin squeeze due to its acquisitions during the quarter.
The Mahindra Group company had registered a post-tax profit of Rs 805.3 crore in the year-ago period.
Its overall revenues surged 16.50 per cent during the quarter to Rs 6,701.1 crore, but operating profit declined to Rs 1,135.9 crore from Rs 1,170 crore.
Its chief financial officer Milind Kulkarni explained that this is mainly due to acquisitions, saying the pre-tax margins have come down to 16.3 per cent for the reporting period from over 19 per cent. He said work is under way to make the acquired assets perform better and hoped that Lightbridge Communications, one of its biggest acquisitions recently at USD 240 million, will perform better from next fiscal.

Stating that the margins have grown 0.30 per cent over the last three months, its managing director and chief executive C P Gurnani said the process of recovery is progressing well at the company.
Kulkarni said that on a sequential basis, there was a 0.25 per cent gain in margins on the back of improvement in utilisation to 90 per cent and a 0.10 per cent benefit from currency movements while factors like furloughs and the Chennai floods acted as headwinds.

The other income stood at Rs 63.9 crore, down from Rs 165.8 crore in the September quarter on dip in dividends and also due to a sales tax write-back in July-September.

It added Rs 1,448 crore to the cash and equivalents, taking its total to Rs 4,940 crore on a reduction in debtor days to 104 as some capex programmes have finished, Kulkarni said.
Tech Mahindra is working out its annual wage hikes and Gurnani conceded that there will be a hit to margins because of the review, which will take effect from January 1.
Gurnani said the company is targeting taking the share of digital revenues to 15 per cent of the overall pie by the end of 2016, from the present 11 per cent.
He said the company is hopeful of bagging up to two smart city projects in January-March. It will continue to invest in start-ups with the theme of being a consumer company or a product player and also a 'brick-and-click' company, he said.

The payments bank should get the final licence early next fiscal, he said, adding that a separate team is working on it.
The stock shed 0.55 per cent to Rs 498.80 on BSE as against a 0.18 per cent slide in the benchmark.