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Tech Mahindra reported a marginal rise in first quarter profits, as Covid-19 continued to impact its business.
In the June-ended quarter, the company posted profit of ₹972 crore, a 1.3 per cent increase compared to ₹959.3 crore posted in the year-ago period. On a sequential basis, profits were up 21 per cent compared to ₹803.9 crore posted in the March-ended quarter. The firm reported an impairment of goodwill and non-current assets at ₹217.5 crore, while other income grew by 45.9 per cent to ₹416.1 crore on a sequential basis, which aided in improved profits.
Revenue up
Revenue from operations for the June-ended quarter came in at ₹9,106 crore, a 5.23 per cent increase compared to ₹8,653 crore in the same period last year. However, on a sequential basis, revenues went down by 4 per cent, compared to Rs 9,490 crore posted in the March-ended quarter.
Tech Mahindra’s performance was an overall beat on what analysts on the Street expected, mainly because most of them expected a larger impact on revenues as a result of Covid-19. “It was a beat on the revenue front driven by lower decline in the enterprise segment versus our forecast,” said Urmil Shah, Analyst, IDBI Capital, which had forecast a 5.9 per cent dip in yearly revenues.
In the June-ended quarter, the enterprise segment, which contributes 60 per cent of revenues, declined 5.3 per cent sequentially and communications, which contributes to the remaining 40 per cent, declined by 8.6 per cent.
CP Gurnani, Managing Director & Chief Executive Officer, Tech Mahindra, said, “We are witnessing a wave of new age technologies being adopted by the customers as businesses across the globe are actively pursuing digital transformation. We are well positioned to capture such spends and our endeavour is to be back on the growth path amid increased signs of demand normalization.”
Sequentially EBITDA declined by 3.5 per cent to ₹1,301 crore, but margin grew by 10 basis points to 10.1 per cent on lower other expenses, ahead of analysts' expectations. Manoj Bhat, Chief Financial Officer, Tech Mahindra, said, “Despite demand uncertainty and volume reduction, we have been able to demonstrate operational resilience through cost optimisation. Cash conversion has been strong, while we aim to improve profitability margins as demand normalises.”
In the quarter, free cash flow was $316.7 million, which Bhat said was one of the strongest in several quarters. Tech Mahindra’s active clients was 981, up by 8 per cent on a quarterly basis. However, its total headcount was 123,416, a reduction of 1,820 employees in the June-ended quarter. The company attributed this to normal attrition and performance-linked exits. Attrition declined to 17 per cent in comparison to 19 per cent in the March-ended quarter.
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