India’s fifth-largest IT services company Tech Mahindra’s September quarter earnings beat Street estimates at Rs 10.64 billion up 27.3 per cent over Rs. 8.9 billion in Q2 FY18 and 18.5 per cent sequentially (Rs 8.3 billion).
Revenue growth however missed the estimates slightly at Rs 86.30 billion up 13.5 per cent Year on year (YoY), up 4.3 per cent quarter on quarter (QoQ). Dollar revenue fell 0.5 per cent to $ 1218 million missing mot estimates of around 1 to 1.5 per cent growth.
“It’s been a satisfying quarter where our focus on digital transformation has helped us deliver a robust performance. Our strong deal wins especially in the Communication vertical coupled with our 10% plus sequential growth in digital revenues are a validation of our Run, Change and Grow strategy.” C P Gurnani, Managing Director & Chief Executive Officer.
There was a sequential decline of almost $40 million due to the closure of two big projects said the management. Earnings before interest, depreciation, tax and amortization (EBITDA) was up to Rs 16.1 billion compared to Rs 13.5 billion last quarter. EBITDA margins jumped to 18.8 per cent from 16.4 per cent last quarter backed by improved automation focus said the management.
Telcommunications, which was among the slower performers last quarter came back in full swing with the management guiding towards greater demand for network modernisation as well as 5G implementation opportunities.
“As expected, Telecom (Rs 42 per cent of sales in Q2FY19) saw growth revival and grew 4.3 per cent qoq in $ terms in Q2YF19. However, higher than expected de-growth in Enterprise business (Rs 58 per cent of sales; down Rs 4 per cent qoq in $ terms) led to lower than expected growth in overall revenues,” said a note from Emkay Global Financial Services.
Headcount grew by 4839, led largely by growth in BPO headcount. Attrition grew to 20 per cent up from 19 per cent last quarter (still lower than Infosys at 22.2 per cent and half of TCS at 10 per cent). The company reinstated their focus on automation for efficiency and higher reskilling among employees through methods like reverse mentorship from junior to senior employees.
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