Q4 results: Weak communications show dials down Tech Mahindra revenue

IT services company Tech Mahindra on Thursday reported a net profit of Rs 661 crore for the fourth quarter ended March 2024, a 41 per cent year-on-year fall from a year ago due to one-time expenses.

Sequentially, the profit was up 29.5 per cent, but it was below the consensus Bloomberg estimates of Rs 741 crore.      

The revenue for the March quarter declined 6.2 per cent from the year-ago period to Rs 12,871 crore, below consensus Bloomberg estimates that pegged the revenue at Rs 12,964 crore. On a sequential basis, the revenue declined 1.8 per cent.

In dollar terms, the revenue declined 6.4 per cent year-on-year (Y-o-Y) and 0.8 per cent quarter-on-quarter (Q-o-Q) in constant currency to $1.55 billion for the March quarter due to headwinds in the communications vertical.

The total contract value (TCV) of net new deal wins stood at $500 million during the March quarter.

“As we step into FY25, we look forward to improvement in client spending, which fuels our optimism for a better revenue performance ahead. Our unique ability to enable customers with transformative scale at unparalleled speed differentiates us from competitors. FY24 posed its fair share of challenges for the IT services sector; yet, amid the global economic uncertainties, we continue to observe a notable push towards digital adoption,” said Mohit Joshi, chief executive officer and managing director of Tech Mahindra.

 

Under Joshi, Tech Mahindra is on a turnaround phase hinged under five pillars: scaling top accounts, and focus on large deals, building synergies from acquisitions, improving cost structure, and predictable and profitable growth.  

Joshi laid down a three-year roadmap at a post-earnings analyst call.

While FY24 was the “beginning”, FY25 will be the “turnaround” phase, followed by “stabilisation” phase in FY26, and finally the phase of “reaping returns” in FY27.

As part of capitalising on the artificial intelligence (AI) wave, Joshi said: “We will be infusing AI in all parts of our offerings.”

The operating margin expanded to 7.4 per cent in the fourth quarter from 5.4 per cent in the preceding three months. However, on an annual basis, margins declined from 11.2 per cent from a year-ago.    

In terms of verticals, communications, media & entertainment (CME) reported the highest de-growth at -16.5 per cent YoY followed by BFSI which declined 4.8 per cent. Manufacturing was the only vertical that reported growth at 6.2 per cent year-on-year (Y-o-Y).  

The voluntary attrition rate, on the last twelve-month basis, for the March quarter remained stable at 10 per cent compared to the preceding three months. On an annual basis, the attrition rate declined 500 basis points from 15 per cent in the same period last year.

The headcount declined by 6,945 employees Y-o-Y and 795 employees Q-o-Q taking the total employee count to 145,455.

Tech Mahindra announced its earnings after market hours on Thursday. Ahead of the earnings, its shares were up 0.3 per cent to close at Rs 1,190.10 on the BSE.