Tech Mahindra Q4 net doubles to Rs 1,222 crore

Tech Mahindra, the country's fifth largest software exporter, today reported doubling of March quarter net profit at Rs 1,222 crore, on widening of margins and other income.

The Mahindra group company had posted a profit of Rs 588 crore in the year-ago period. For fiscal year 2017-18, its bottomline grew by 35 per cent year-on-year to Rs 3,800 crore.

Its revenues grew 7.5 per cent to Rs 8,054 crore in the March quarter, while the pre-tax profit was up 57.1 per cent to Rs 1,412 crore.

CP Gurnani, managing director and chief executive officer, Tech Mahindra, said the pre-tax margins widened by over 1.2 per cent during the three months to 17.5 per cent on better utilisation, operational efficiencies and better product mix.

Shedding of USD 100 million of non-strategic business in the telecom vertical also helped the margins, he said, adding even though that resulted in a de-growth in the contribution of revenues from the vertical.

"There is a growth in deal pipeline with a greater affinity on digital and platform related deals," Gurnani said.

The company is also witnessing a shift in the composition of deals away from the traditional ones, Gurnani said, specifying that the quantum of the legacy 'run' deals has decreased considerably to 'change' ones.

There was a dip in the number of employees to 1.12 lakh from the over 1.17 lakh employees one year ago, which was attributed to a shift to digital services by Gurnani.

He said the proportion of revenues from the upcoming digital stream has grown to 27 per cent now, and is likely to go up further.

The company, which is sitting on a cash of over Rs 7,700 crore, is also looking at acquisitions of digital platforms, he added.

It experienced some softness in the largest revenue contributor, telecom, leading to its share coming down to 41 per cent.

Gurnani said the outlook for the telecom sector hinges on the adoption of 5G, which will determine the demand for services.

Healthcare, banking and manufacturing verticals reported healthy growth in revenues in the just concluded fiscal, he said.

The company's outgoing chief financial officer, Milind Kulkarni, said it has more levers to widen margins left with itself and will be exercising the same during the new fiscal.

Manoj Bhat, who will be replacing Kulkarni once the latter retires end of this month, said the ongoing depreciation of the rupee will definitely help the IT exporting company and added that it is not changing its hedging strategy in face of the current movements.

Gurnani said the company looks at the introduction of the GDPR framework in the EU as an opportunity to grow its cyber security offerings, and added that there has already been an uptick in the same.

The company's scrip closed 1.11 per cent lower at Rs 702.45 a piece on the BSE, against 0.76 per cent gains in the benchmark.