Tech Mahindra Q2 net down 5.2% to ₹1,064 crore

Our Bureau Mumbai | Updated on October 23, 2020

CP Gurnani, MD and CEO, Tech Mahindra   -  BUSINESS LINE

Tech Manindra reported a net profit of ₹1,064.6 crore in the September-ended quarter, a 9.5 per cent increase on a sequential basis. In the June-ended quarter, profit was ₹972.3 crore. However, on a yearly basis net profit was down 5.27 per cent when compared to ₹1,123.9 crore posted in the year ago period.

Revenues for Q2 were ₹9,371.8 crore, a 2.9 per cent increase when compared to ₹9,106.3 crore in Q1. On a yearly basis, revenues were up by 3.32 per cent when compared to ₹9,069.9 crore. Tech Mahindra’s US Dollar revenues were $1,265.4 million, up 4.8 per cent QoQ, but down 1.7 per cent on a yearly basis.

“Revenue growth of 2.9 per cent QoQ was higher than our forecast of 1.7 per cent,” said Urmil Shah, Research Analyst and VP, IDBI Capital.

CP Gurnani, Managing Director & Chief Executive Officer, Tech Mahindra, said: “Our Repair, Rally and Rise strategy has helped the company to emerge stronger, as we journey towards a post Covid world. We are witnessing demand revival across multiple segments, as customers have accelerated their pace of digital transformation.” TCV of new deal wins for Tech Mahindra was $421 million.

Tech Mahindra also announced the acquisition of Momenton, a digital enterprise technology firm, offering consultancy and implementation services, and Tenzing Ltd, a technology consulting company. Tech Mahindra has acquired 100 per cent equity in both the organizations, and together they will enable digital capabilities, modern cloud-based architecture and transformation for customers in Australia and New Zealand, specifically in the Financial Services sector.

“The acquisition of Momenton and Tenzing Ltd, are in line with our strategy to strengthen our digital capabilities, and offer our clients end-to-end transformation services. This will significantly enhance our local presence in the markets, and the combination will create significant synergies and help in bringing next generation solutions to customers enabling them to run better, change faster and grow greater,” said Vivek Agarwal, Head Corporate Development & Global Head for Healthcare and Financial Services, Tech Mahindra.

In news that could cheer investors, the Board has proposed a special dividend of ₹5 per share.

The quarter also saw margins at 18.2 per cent, a huge jump of 390 basis points or 3.9 per cent. Employee cost remained flat, sub-contracting cost declined by 7 per cent, and decline in SG&A costs have resulted in a whopping improvement in EBIT margin,” said Shah. In the quarter, Tech Mahindra had free cash flow at $235.7 million and had total cash of $1.56 billion at the end of September. Active Clients grew 7 per cent sequentially to 988. Tech Mahindra also added 842 people in the quarter and had a total headcount of 1.24 lakh employees. Gurnani said that it will roll out salary hikes in early 2021. “We haven't decided on the quantum of hikes, it may be staggered. Junior employees will get hikes by fiscal 2020-21 and senior employees could get hikes in calendar year 2021,” he said.

Published on October 23, 2020

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