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Worse-than-expected results from Tech Mahindra resulted in the scrip being battered over 14 per cent on the bourses on Wednesday with brokerages promptly downgrading the IT bellwether.
Poor execution The company lost 14.72 per cent on the NSE to close at ₹549.10 a share. Over 2.29 crore shares were traded with a delivery percentage of 56.43. The story was no different on the BSE. It closed at ₹549.35 a share, down 14.24 per cent. Over 27.72 lakh shares changed hands with a delivery percentage of 42.64.
Kotak Institutional Equities said in a report, “A disappointment on all counts. Tech Mahindra disappointed with 1.7 per cent revenue miss, 500 bps operating profit margin contraction, and 33 per cent miss at the net profit level. The reason for the miss was all-round poor execution.”
According to Motilal Oswal Institutional Equities, “Tech Mahindra’s organic revenue decline of 1.2 per cent in constant currency was below our estimate (2 per cent miss), led by manufacturing decline of about 5 per cent+ in constant currency. While we expected tepid growth in telecom, sluggishness in manufacturing was a negative surprise, driven by aerospace and energy sub-segments.”
Sub-12% growth in FY16 CLSA in its report said, “Limited near-term visibility on organic growth and poor hiring suggest sub-12 per cent growth in FY16. Execution on margin recovery and acquisition integration remains crucial for sustaining multiples.”
Downgrading its recommendation to ‘Hold’, Reliance Securities said in a report, “We believe that margin recouping from Q4 will be protracted as headwinds, such as visa cost and business integration, intensify.
Emkay Global in its report observed, “Management expects weakness in telecom to continue with some improvement in enterprise segment in the June quarter; management focused on utilisation optimisation and higher offshoring to drive operating margin improvement in the near term.”
Barclays said, “Overall earnings per share (EPS) of ₹4.9 in the quarter was 32 per cent below our estimate. While we build some bounce back in both growth and margins going forward, our EPS numbers still decline 7 per cent/ 3 per cent for FY16/17E.
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