The net profit of IT major Tech Mahindra fell by 26 per cent year-on-year in the concluding quarter of FY23 fiscal.

Tech Mahindra announced its financial results on Thursday, and the net profit of the company fell to ₹1,117 crore in Q4 FY23, from ₹1,505.7 crore reported in Q4 FY22. 

Revenue from operations rose by 13.2 per cent year on year to ₹13,718 crore in Q4 FY23 versus ₹12,116 crore reported in Q4 FY22. 

The company reported margins at 14.7 per cent, down 90bps quarter on quarter. Profits for the company were also down on a quarter-on-quarter basis by 31.6 per cent. 

Notable deals

The IT company recorded deal wins worth $592 million in Q4 FY23, thus seeing a sequential softness of almost 25 per cent. Some notable deals for Tech Mahindra include being selected by a large telecommunications operator in America to improve their customer experience.

Other large deals include being selected as a digital infrastructure partner by a large not-for-profit Enterprise Health System in America; and as a long-term strategic partner by an African power transmission provider; a strategic partner by a large development and construction company in Europe

For the FY23 overall, profit after tax was at ₹4,832 crore, down 13.2 per cent year-on-year. The EBITDA margin was 15.1 per cent, down 290 bps. This is mostly in line with the street’s estimates.

Bullish on investments

Although the IT company ended the quarter on a dampener, owing to the overarching macroeconomic conditions, Tech Mahindra CEO, CP Gurnani, indicated that the company continues to be bullish on investments during this period of downturn.

Gurnani expects the headwinds in the IT sector to alleviate in the next couple of quarters, in the meantime, Tech Mahindra continues to invest in frontier technologies such as open AI and automation. 

Tech Mahindra is also directing investments in emerging markets such as Japan and the Middle East, as it continues to see macroeconomic pressures in the United States and Europe.

LTM attrition for Q4 FY23 was at 15 per cent. Tech Mahindra, which had reduced fresher hiring in FY23, will increase fresher hiring in the next fiscal.

Gurnani added: “As we step into FY24, we see the increasing need for businesses to stay agile by leveraging next generation technologies. We are strongly focused on helping our customers stay competitively dominant and relevant in the era of fast evolving market conditions by helping them adapt to leaner and sustainable business models” 

Rohit Anand, Chief Financial Officer, Tech Mahindra, said: “Our strategy of prudence and operational excellence helped us through the uncertainties of FY23. We continue to return cash to shareholders through a consistent dividend policy. We move into the next fiscal, with sharper focus on productivity improvements, cash & value creation for our stakeholders.”

The TechM Board has recommended a final dividend of ₹32 per share, taking the total for FY23 to ₹50 per share.

‘Subdued performance’

Mitul Shah, head of Research at Reliance Securities, on the results, said, “TechM reported a subdued performance. Margins were below our estimates. However, subdued performance in technology and retail verticals and key geography of the Americas is a concern. We expect margin pressure build-up over the near term amid a slowdown in the American region.”

Shah added, “Though we expect an uptrend in technology spending to continue, the industry will record single-digit revenue growth due to global slowdown and deferment on technology spending by a few telecom players in the US. We believe that higher exposure to Europe and CME vertical would pause a challenge for a company ahead.”