Tech Mahindra Q1 profit up 34% at ₹1,140 crore, revenue rises 2.7%

Information technology (IT) services and consultancy firm Tech Mahindra’s on Wednesday reported a 34 per cent rise in its first quarter profit. The Pune-headquartered firm’s profit increased to ₹1,140 crore, compared to ₹851.5 crore a year earlier. The firm’s profit fell 2.2 per cent from the last quarter.

 

Revenue for the quarter increased 2.7 per cent to ₹13,351 crore, helped by communications and banking financial services and insurance (BFSI) business. Both the verticals, which contributed 33.8 per cent and 16.4 per cent to the topline, were up 2.5 per cent and 4.7 per cent, respectively.

 

The results missed Bloomberg estimates on both profit and revenue, which were expected to be ₹1,195.1 crore and ₹13,422.3 crore for the quarter. 

 

“The market is very volatile and the macro environment continues to remain uncertain. The sentiment is not conducive for discretionary investments,” Mohit Joshi, chief executive officer of the firm, said at a news conference on Wednesday.

 

While the firm’s biggest business, telecommunications, remains stable and on track for growth, the company continues to see slowdown in the auto business and hi-tech. Manufacturing, which includes auto, declined 4 per cent while technology, media and entertainment business was down 3.3 per cent.

 

“It is too early to say the tide has turned for significant growth,” cautioned Joshi. “Hi-tech has been volatile and clients cut spending quickly if they fear a recession. During the quarter, the segment was also impacted due to a semiconductor company in the US. We expect a better second half for this business.”

 

From a geographical perspective, the growth in America dropped about 6 per cent, only to be offset by Europe which was up 11.7 per cent. Trade wars and tariff threats have dampened business sentiment with manufacturing, retail, and consumer packaged goods already bearing the brunt.

 

“The macro is still hazy in certain sectors due to tariffs,” he added.

 

New deal wins for the first quarter was $809 million, up 51.5 per cent from last year. The company expects new deals to contribute to the topline from the second quarter. 

 

Operating margins climbed up to 11.1 per cent from 8.5 per cent a year ago, helped by operational efficiencies. “We have delivered seven consecutive quarters of margin expansion - a clear reflection of the discipline and focus across our organisation. Even in an uncertain environment, our Project Fortius programme continues to generate meaningful results and drive operational improvements,” chief financial officer Rohit Anand said in a statement.

 

IT headcount stood at 79,987 as of June 30, down by 430 in the corresponding period of the last year. Attrition was up to 12.6 per cent from 10.1 per cent. Hiring for the year will depend on the demand environment.