TechM profit plunges 31% to ₹588 crore in Q4

Updated - January 12, 2018 at 01:52 PM.

Dragged down by renegotiation of contracts and currency volatility

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Tech Mahindra, India’s fifth largest software exporter, reported a 31.2 per cent dip in its fourth quarter net profit at ₹588 crore, impacted by currency volatility, renegotiation of contracts and a one-time loss on account of exiting a contract.

Revenues for the quarter were up 8.9 per cent at ₹7,495 crore from ₹6,884 crore.

“Profits were impacted on three counts — $15 million on account of re-profiling the Lightbridge Communications Corporation (LCC) business, $20 million on account of exiting an LCC contract and due to currency volatility impact,” CP Gurnani, Managing Director and CEO at Tech Mahindra, said, adding that focus going forward would be to improve margins that were severely hit in this quarter.

The re-profiling of business was described by the company as renegotiation of contracts by cash-strapped clients. The impact could be seen in the next few quarters as well.

The operating profit was down to ₹821.3 crore from ₹1,056.7 crore, and the operating profit margin to 12 per cent from 16 per cent in the year-ago period.

Concern of protectionism

Vineet Nayyar, Vice-Chairman, Tech Mahindra, said the increasing protectionism across the world is affecting business.

“Protectionism has brought in some challenges and that is restricted to just US. While the US may be talking about it openly, many European countries are getting even more protectionist. The situation is challenging for us,” he said. Tech Mahindra has about 6,000 people working for it in the US, of which 2,000 are US citizens while the rest are Indians working on H-1B visa or green card. The company said it has not increased US workforce so far but could look at doing it soon.

“We are willing to hire in the US but the kind of skills that the market requires are just not available there or anywhere else in the world,” Gurnani said, adding that the company will invest more in reskilling its entire workforce and doubling the average training time to one month a year per employee.

Gurnani hinted that some employee would be laid off if they are unable to reskill themselves as the company sees a shift from traditional business to digital. The company while cut 1,000 jobs in the BPO business in the quarter saw a gross addition of about 600 employees, Gurnani said.

On a full-year basis, Tech Mahindra reported a 6 per cent drop in net profit at ₹2,813 crore for FY17 and a 10 per cent increase in revenue at ₹29,141 crore.

The EBITDA was down 2 per cent at ₹ 4,184 crore and margins were at 14.4 per cent.

Published on May 26, 2017 16:01