TechM shares drop 2% as Q2 profit slips YoY; should you sell or hold?

Tech Mahindra's new deals in the second quarter were worth $816 million, up 35.3 per cent from last year

Shares of Tech Mahindra Ltd. fell nearly 2 per cent on Wednesday after its second-quarter profit slipped year-on-year (Y-o-Y) while analysts noted that the overall growth visibility remains soft. 

 

The information technology (IT) major's stock fell as much as 1.88 per cent during the day to ₹1,440.4 per share, the biggest intraday fall since September 26 this year. Tech Mahindra stock pared losses to trade 1.5 per cent lower at ₹1,445 apiece, compared to a 0.46 per cent advance in Nifty 50 as of 9:34 AM. 

 

The counter has fallen 15 per cent this year, compared to a 6.8 per cent advance in the benchmark Nifty 50. Tech Mahindra has a total market capitalisation of ₹1.41 trillion. 

Tech Mahindra Q2 results

Tech Mahindra’s net profit declined 4.5 per cent to ₹1,195 crore in the September quarter over a year earlier. It was, however, slightly higher than ₹1,141 crore sequentially.

 

Revenue rose 5.1 per cent to ₹13,995 crore, helped by manufacturing, and banking, financial services, and insurance (BFSI). Both the verticals, which contributed 18.1 per cent and 16.8 per cent, respectively, to the top line, were up 5.2 per cent and 6.2 per cent, respectively. 

 

While the telecommunications business, Tech Mahindra’s biggest, was down 2.2 per cent, the company continues to see a slowdown in the auto sector. New deals in the second quarter were worth $816 million, up 35.3 per cent from last year.

 

“The past year has been one of the low points for the industry and the discretionary spend is limited, with most projects being consolidation and cost take-out ones,” Chief Executive Officer Mohit Joshi said at a news conference on Tuesday. 

Analysts on Tech Mahindra Q2 earnings

Analysts at JM Financial noted that growth acceleration in FY26 and possibly FY27 is tracking below what the company had assumed at the beginning of FY25. They cut their FY27 estimated dollar revenue growth to 4.6 per cent in constant currency terms (from 5 per cent), in line with larger peers.

 

Motilal Oswal said Tech Mahindra’s disciplined execution has brought it closer to its FY27 targets, with improving deal momentum and a steady expansion in margins. The company reported a beat on both revenue and margins, supported by healthy total contract value (TCV) growth.

 

The brokerage noted that while overall growth remains slow, operational discipline and improved client mining are evident. It expects margins to improve gradually and linearly in the second half of the year, with FY27 likely to be a period of steady rather than sharp gains.

 

With continued strength in the BFSI segment and improving operational efficiency, Motilal Oswal sees further scope for margin expansion ahead. It has a 'Buy' rating with a target of ₹1,900 apiece. 

 

Antique Stock Broking said the management commentary indicated that the second half of the year is expected to be stronger than the first, with financial year 2027 shaping up to be better than FY26. However, growth expectations have been reset to a more realistic range, likely in the mid-single digits for revenue, supported by stronger operating leverage.

 

The brokerage noted that while overall growth visibility remains soft, the management reiterated its focus on consistent margin expansion quarter after quarter. It has a 'Hold' rating with a target price of ₹1,468 per share.