India’s Tech Mahindra beats July-Sept revenue view

By Haripriya Suresh

BENGALURU (Reuters) – Indian IT services firm Tech Mahindra on Saturday reported revenue grew more than expected in the three months through September, aided by growth in European and other non-American markets, as well as the banking, financial services, and insurance (BFSI) segment.

Revenue rose 3.49% to 133.13 billion rupees ($1.58 billion) for its financial second quarter from the same period last year, beating analysts’ average estimate of 131.9 billion rupees, according to data compiled by LSEG.

Tech Mahindra continued to see weakness in its communications segment, which contributes a third of overall revenue.

Higher borrowing costs along with macroeconomic and geopolitical risks have prompted clients to curb their spending on discretionary tech spending.

“Our key telecom clients continue to prioritise cost savings and their spending on discretionary projects is constrained,” CEO Mohit Joshi said in a post-earnings call. Joshi said there were client-specific pressures in the US in this segment.

The Pune-based firm registered revenue growth of 4.5% in its BFSI segment, and 2.4% in its Hi-Tech and Media segment, with Europe up 4.1% and its the Rest of World market growing 9.7%.

Net profit increased 153% to 12.5 billion rupees ($149 million), aided by the one-time gain by the sale of land, and along with furniture and fixtures, leading to other income of 5.2 billion rupees.

Tech Mahindra’s order bookings fell to $603 million from $640 million in the same quarter last year.

In April, the firm unveiled a three-year turnaround plan aimed at increasing revenue and doubling its operating margin to 15% by fiscal 2027 after multiple quarters of slowing growth and a significant decline in its margins.

Joshi said this was the early stages of turnaround for the business, and that they expect “to see some volatility in the telecom and the BFSI portfolios” going ahead.

The results are a signal towards a positive trend, said Gaurav Parab, a principal research analyst at NelsonHall.

“Mohit Joshi’s strategic initiatives around restructuring delivery, focussed account management, and margin improvements are now taking root, although significant outcomes will take a couple of quarters more,” he said.

($1 = 84.0650 Indian rupees)