Tech Mahindra has reported better-than-expected results for the June ending quarter. Revenue from services grew 0.9 per cent sequentially.

The enterprise business recorded a 4 per cent growth over the March quarter and the core telecom business recorded 2.4 per cent growth. It was the network services and the mobility business that drove the overall growth numbers lower.

Revenue from top 10 clients grew 40 per cent from 39 per cent in the last quarter - the first quarter of an improved client mining in recent times.

The number of clients in $20-million plus bucket increased from 40 in the March quarter to 42 in the current quarter. The total number of active clients stood at 818, up from 807 in the previous quarter and 770 in the same quarter last year.

In comparison to other big IT services companies (Infosys, TCS, Wipro) that have so far declared results, HCL Tech’s performance on the revenue front is not impressive (others have reported 2-3 per cent sequential dollar revenue growth), but, given that the sequential revenue growth was the fastest since the December 2015 quarter, it is still not a bad show.

Giving thumbs up to the company’s improved performance, the stock of Tech Mahindra rallied over 3 per cent in the opening on the bourses on Tuesday.

Employee attrition stayed at 21 per cent, the same as that of the last quarter, while utilisation improved to 78 per cent from 77 per cent in the previous quarter.

Weak margins

The company’s operating profit margins though dropped sharply. For the June ending quarter, operating profit margin was 14.9 per cent, down from 16.7 per cent in the March quarter.

The company attributed higher visa costs and seasonal weakness in the business of its subsidiary - Comviva to have weighed on the margin.

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