Tech Mahindra's June quarter numbers suggests that IT spending from the telecom segment is reviving, albeit slowly.

The company has witnessed several large-client additions, even as its key customer - BT grew. Of course, Mahindra Satyam has also played its part in boosting profits.

What should be heartening is the fact that non-BT customers, accounting for around 60 percent of revenues expanded at a pace of 5.5 percent sequentially. This significantly reduces concentration risks, apart from indicating broader client interest.

During the quarter, while revenues grew by 2.5 per cent sequentially to Rs 1,292.5 crore, net profit zoomed nearly 200 per cent to Rs 276.5 crore. The net profits include its share of Rs 96 crore from Mahindra Satyam, which had a sound June quarter.

The profit growth comes despite the wage increases and increased tax outflow during the quarter.

Tech Mahindra had a volume(person-months billed) growth of two per cent, which given its single vertical focus is quite reasonable, especially in a difficult environment. Pricing has remained fairly steady.

Scope for further improvements

Utilisation, at 71 per cent, offers scope for further improvement to 75 per cent levels, as more deals flow in and more manpower resources become billable in the coming quarters.

The company added three clients in the $5-million plus category and one in the $10-million plus range during the quarter, making the deal pipeline fairly robust.

This also suggests that client spending in the telecom vertical is witnessing a slow uptick, although discretionary projects are yet to take off in a significant manner.

The key geographies in which Tech Mahindra operates – Americas and Europe (together 83 percent of revenues), have grown. Significantly, revenues from emerging markets have risen 15.3 percent sequentially, thus creating a well-blended demand base.

Related Topics
comment COMMENT NOW