Last updated: 30 Jul, 2021 | 04:13 pm
Profit beats estimates: IT firm Tech Mahindra reported a 25% rise in its net profit for the quarter ended June at Rs 1,353.2 crore as against Rs 1,081.4 crore in the last quarter, beating analyst estimates. Analysts had earlier estimated a profit of about ₹1216 crore. On a yearly basis, net profit rose 39% from 972 crore in the same quarter last year. The bottomline was aided by major deal wins.
Revenue rises: Revenue for the Apr-Jun 21 quarter rose 5% sequentially to Rs 10,197.6 crore compared to Rs 9,730 crore last quarter. Analysts had earlier estimated a profit of about Rs 10,073 crore. On a yearly basis, revenue rose 12% from Rs 9,106 crore in the same quarter last year. Both IT and BPO segments saw a yearly rise of 8% and 60% respectively. In terms of geography, America accounted for 46.7% of revenues while Europe accounted for 27.2% and ROW accounted for 26.1%.
Tech Mahindra Q1 : Important highlights
Operating margins decline: The operating performance of the company weakened during the quarter sequentially, as EBIT declined 3.6 % to Rs 1,545.3 crore from Rs 1,603.7 crore last quarter as the company rolled out wage hikes. EBIT margin narrowed by 130 bps to 15.2% from 16.5%, QoQ.
Tech Mahindra Q1 results Review:
Tech Mahindra has posted a strong set of numbers aided by demand revival across multiple segments. Company continues to see strong traction in large deal wins with the net new deal wins came in at $815 million. The company is well invested in capturing opportunities from the expansion of the 5G value chain across networks and IT services from both telecom service providers and enterprises.The Covid-19 pandemic has forced a tectonic shift in business processes to move towards greater digitization.In fact, Tech Mahindra has said that many of its customers are adopting new-age technologies as businesses across the globe are actively pursuing digital transformation.
The growth in Apr-Jun quarter has improved visibility for the rest of the year for Tech Mahindra.The attrition rate has been constant at 17%, YoY. The company is also confident of further expanding its revenues and margins going forward. Tech Mahindra’s peers Infosys Ltd., Wipro Ltd. and HCL Technologies Ltd., too, saw their net profit rise in the quarter ended June except for Tata Consultancy Services Ltd. whose profit dropped 2.5%. Revenues of all companies, however, rose.
Brokerages see all-around revenue growth, healthy margin outperformance and good deal wins. More importantly, the communications vertical is showing signs of a sustainable recovery courtesy of modernisation and will grow in double digits after many years. The brokerage would also await clarity on the impact of 5G spend on growth, given the repurposing of budgets in 5G, which should taper down the momentum unlike previous cycles. The consensus target price range is between 1200-1450. Most of the firms including Kotak Institutional maintain a buy rating.The shares of Tech Mahindra ended 0.75 percent higher at Rs 1,127.95 apiece on the BSE.