Tech Mahindra confident despite 20% profit drop

Our bureau Mumbai | Updated on January 24, 2018 Published on January 30, 2015

IT solutions company Tech Mahindra has reported a 20 per cent fall in net profit for the third quarter ended December 31, 2014. This decline must be seen in the context of exceptional gains related to taxes and past provisions recorded in the comparable year ago period by the company.

The company’s net profit in Q3 stood at Rs 805.3 crore as against Rs 1010 crore in the corresponding quarter a year ago.

Revenue went up by 17.4 per cent to Rs 5751.7 crore (Rs 4898.5 crore)

For the quarter ended December 31, 2014, Tech Mahindra had reported an exceptional gain of Rs 120 crore, representing a write back of the estimated excess provision for contingencies provided in an earlier year by erstwhile Satyam.

Moreover, the company had recorded a tax writeback of Rs 226.6 crore in order to protect itself from various taxation disputes related to Satyam. The provision for taxation in December 2014 quarter was almost ten times higher to Rs 251.2 crore (Rs 26.4 crore). Mahindra Satyam merged with Tech Mahindra last year.

On a year-on year basis, Tech Mahindra’s net profit went up by 12 per cent.

The company management expects to sustain this momentum going forward. “The good news is that all major geographies did well in the quarter gone by. We are seeing strong traction in the US and Europe,” said CP Gurnani, Chief Executive Officer of the company.

The third quarter is generally a weak quarter for software companies due to factors such as fewer working days, broad-based furloughs (a furlough is a temporary leave of some employees due to special needs of a company) across industries and lower project based spending by clients. All indications are that Q4 may be a better quarter for the Mumbai-based IT company.

In line with the commentary from other frontline IT services firms, Tech Mahindra said that digital transformation will be a key theme for growth in calendar 2015.

Taking cues from rivals Infosys and HCL Technologies, Tech Mahindra has decided to give one bonus share for every share held in the company. The company has also decided to split its shares in the ratio of 2:1. This means, after accounting for the bonus issue and stock split, an investor who holds one share of Tech Mahindra will not get three additional shares of Rs 5 face value

Shares of Tech Mahindra were down by 0.83 per cent to close at Rs 2878.3 on the Bombay Stock Exchange today.

Published on January 30, 2015
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