Tech Mahindra: Street questions inorganic growth strategy

Analysts pare earnings estimates on high integration costs and volatility in telecom vertical

Inorganic growth has been the buzzword for India’s information technology (IT) sector, with large companies announcing an acquisition or two over the past 12 months. The Street is now turning cautious, as it needn’t always be margin-accretive. An example is Tech Mahindra’s weaker than estimated performance in FY15, thanks to a sharp fall in profitability at Lightbridge Communications Corp (LCC). Tech Mahindra acquired Lightbridge for $240 million in 2014. After reporting superior revenue growth rates through FY13-14, Tech Mahindra’s organic growth has come off ...