The operating margin for the Mahindra Group company stood at 13.2% in the three-month ended March compared to 14.8% clocked in the previous quarter. The management of the company said that this was due to lower utilization led to a 400 basis points drop and higher salary and retention costs also dragged the margins.
The revenue numbers were in-line with street estimates as YoY revenue growth was seen at 24% according to the average estimate of four brokerages polled by ET. Profit growth beat the estimate of 32% year-on-year given by brokerages.
On a sequential basis, net profit grew 10% while revenue grew 5.8%. For the financial year ended March, the company’s consolidated revenue rose 17.9% to Rs. 44,646 crore and net profit clocked Rs 5,566 crore, up 25.7%.
The board has recommended a final dividend of Rs.15 per share and a special dividend of Rs 15 per share, subject to regulatory approvals.
CP Gurnani, managing director & chief executive officer, Tech Mahindra said that he is “I’m satisfied with the continuing pace of large deal wins”. The company also benefited from an overall tax rate 17.5% compared to 27% in Q3 due to reversal of SEZ tax provisions under a new tax regime.
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The company reappointed CP Gurnani as the managing director and CEO for another term ending in December 2023. The company also announced the appointment of Rohit Anand as the chief financial officer of effective June. Rohit Anand will take over from the current CFO, Milind Kulkarni, who’s retiring after working with Tech Mahindra for over two decades.
“Tech Mahindra’s commitment towards sustainable digital transformation and investment in new-age technology stacks has resulted in one of the highest growth with large deal wins over the last 7 years. The company continues to invest in products and platform. And these platforms are more geared toward business processes or service,” he added.
The company’s order book stood at $1.01 billion in terms of net new deals in the three-month period. The metric stood at $1.04 billion for the year-ago period and $ 704 million for the December-ended quarter. This takes full year reported TCV to $3.3 billion compared to $2.3 billion in FY21.
“I’m happy that CME (communications, media and entertainment vertical) will always be the northstar and they are doing very well. BFSI joined the billion dollar club,” said Gurnani.
Ashis Das, research analyst, Sharekhan by
said that the company revenue performance met its expectations and it outperformed on its net new deal performance driven by the communications vertical. “However, employee retention costs, onsite and travel expenses have chewed into margins. On the bright side, attrition has remained stable with these interventions,” he stated.
Attrition rate for the quarter was 24% flat compared to December quarter. Employee headcount grew by 6,106 to reach 151,173 during the quarter. The company plans to hire over 10,000 freshers in FY23 as it has done in the FY22 fiscal. The company stated that it has given out average salary hikes of 8-10% in FY22.
The Indian sector has reported record attrition this quarter with
at 17.4%, at 27.7%, at 21.9% and at 23.8%.
Demand environment
“ I think there is a potential worry about both inflation and the geopolitical situation and they are obviously interlinked. But we haven’t seen any impact on demand scenario from our clients as of now, from any of those things playing out,” said Vivek Agarwal, head of corporate development, Tech Mahindra responding to queries on demand environment.
Agarwal added that the company will spend the ongoing fiscal integrating the number of acquisitions it has reported over the past year.
The results come a week after the LTIMindtree merger announcement where the combined entity under the Larsen & Toubro Group is poised to edge out Tech Mahindra as the country’s fifth largest IT services provider by market cap. Combined LTIMindtree revenue for FY22 stood at $3.5 billion and profit of $530 million compared to Tech Mahindra’s revenue at $5.9 billion and profit of $746 million for the same period. Analysts suggest that while both LTI and
have strong margin performance, at Tech Mahindra’s current growth rate, especially in the CME vertical, it will continue to outperform the new company by revenue for at least three years.
Among geographies,on a year on year basis, the America region grew 28.5%, Europe grew 20.3% and the rest of the world grew 9.3%. Communications and media vertical grew 23.7% YoY and 4.8% sequentially while enterprise vertical grew 21.9% YoY and 5.8% sequentially. The manufacturing and retail verticals witnessed a fall in sequential revenue numbers due to seasonality factors.
