Tech Mahindra net declines 23%

IT services firm Tech Mahindra has earmarked ₹300-400 crore for capital expenditure this year. The IT firm will be using most of the funds in making a couple of acquisitions in a bid to transform itself from a traditional IT service provider to become a new age digital player.

Tech Mahindra’s CEO, CP Gurnani, said, “We can’t give any specific timeline but M&A is still a part of our strategy. It is critical and we strongly believe that there are new markets and services.”

The company, in the last quarter of last fiscal ending March 31, had made two acquisitions – LCC and SOFGEN – which together contributed approximately ₹630 crore ($100 million). He also said that the company’s inorganic growth was better than the organic one. In fact, the company has witnessed decline in its organic business.

“Our growth journey continues with entry into new technology and business areas. The focus will be on productisation for non-linear growth and towards maximum value from our well-entrenched customer relationships,” he said.

Meanwhile, the recent acquisitions along with a few other factors such as cross currency headwinds and salary hikes have dragged the company’s net profit by 23 per cent to ₹472 crore for the quarter ended March 31. Its net profit for the corresponding quarter in the last fiscal was ₹614.21 crore.

The company’s revenues, however, grew 20.9 per cent to ₹6,116.79 crore in the reported quarter, from ₹5,058.11 crore in the same quarter of 2014.

The company, however, said that the margins will increase and get better by the middle of this year, given the focus on consolidation, and integration of the acquisitions.

The Board of Directors have proposed a dividend of ₹6 per share (120 per cent) for FY 2014-15. Tech Mahindra’s total headcount stood at 1,03,281 at the end of March, with the addition of 13,840 professionals during the year.

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