Tech Mahindra Q2 net slumps 17%; Belgian revamp hurts margins

Country's fifth largest software exporter Tech Mahindra today reported a 16.93 per cent dip in September quarter net income at Rs 644.7 crore from Rs 776.1 crore a year ago owing to restructuring exercise in Europe which hurt its margins.
Though revenue rose 8.34 per cent to Rs 7,167.4 crore, margins compressed to 14.9 per cent from 16.4 per cent.
Chief Financial Officer Milind Kulkarni said the quarter saw a USD 13 million hit due to a one-time restructuring exercise in Belgium, where it transfered a part of its operations to India, resulting in margin impact.
Provisions for taxes also increased to Rs 286 crore from Rs 190 crore in the year-ago period, but Kulkarni clarified that this does not signify an increase in the overall tax outgo, which is spread over the year.

During the reporting quarter, revenue from European operations grew the fastest at 9.4 per cent over the preceding June quarter, followed by the US at 2.5 per cent.
Vice-Chairman Vineet Nayyar flagged concerns on the increasingly protectionist attitudes across the world, and added that irrespective of the election result in the US, "we should expect more of the inward looking outlooks".

Stating that the company is "cautiously optimistic", he said it has the uniqueness required to manage the heightened "insularity" at the world stage.
It bagged three large deals during the quarter, including two which will deliver revenues in excess of USD 10 million a year, Managing Director and Chief Executive C P Gurnani said, adding over half of the new contracts are for digital services.

Revenues from the manufacturing sector grew the fastest at 10.3 per cent, while its mainstay communications saw revenues rising 2.4 per cent compared to the June quarter.
Gurnani pointed out to energy, defence and aerospace as sectors where it has some concerns.
Kulkarni said there was a mark-to-market gain of USD 16 million due to currency movements on its hedging positions.
Attrition came down to 19 per cent from the 20 per cent in the year-ago period, while the utilisation, including trainees, moved up to 78 per cent.
Gurnani said it is a continuous endeavour to increase the utilisation, which will help the margins. As of end September, it was carrying Rs 4,000 crore in cash and equivalents.

The company scrip closed 2.46 per cent lower at Rs 414.8 a share on the BSE against a gain of 0.46 per cent in the benchmark.