Latest news with #TechMahindraLtd
Business Standard
6 days ago
- Business
- Business Standard
Quick Wrap: Nifty IT Index registers a drop of 1.39%
Nifty IT index closed down 1.39% at 37138.55 today. The index has lost 6.00% over last one month. Among the constituents, Tech Mahindra Ltd fell 2.75%, LTIMindtree Ltd shed 2.49% and Persistent Systems Ltd dropped 1.75%. The Nifty IT index has decreased 5.00% over last one year compared to the 2.03% spike in benchmark Nifty 50 index. In other indices, Nifty Realty index increased 1.24% and Nifty PSU Bank index has dropped 0.79% on the day. In broad markets, the Nifty 50 has dropped 0.40% to close at 25111.45 while the SENSEX has declined 0.45% to close at 82259.24 today.
Mint
6 days ago
- Business
- Mint
Tech Mahindra's Q1 margin wins face off against macro headwinds
The June-quarter results of Tech Mahindra Ltd had some bright spots. First-quarter Ebit margin rose sequentially for the seventh straight quarter, improving by 56 basis points (bps) to 11.1%, surpassing consensus estimates. Also, a seasonally slow quarter for the company's mobility solutions business, higher visa costs, and lower employee utilisation were offset by savings from TechM's Project Fortius, favourable offshore mix, and optimisation of general and administrative expenses. Offshore mix refers to information technology (IT) service providers allocating software development work to teams located in different countries, mainly for the purpose of saving costs. As part of Tech Mahindra's Project Fortius, the management has retained its margin target of 15% by 2026-27. The company aims to achieve the target within the timeline by consistently hiring fresh graduates, improving its employee utilisation rate, lowering subcontracting costs, higher offshoring, and competitive pricing. 'While the employee pyramid is similar in FY25 compared with FY24, TechM has done better than TCS (Tata Consultancy Services) and Infosys, despite weaker revenue performance," analysts at Kotak Institutional Equities said in a report dated 16 July. 'These elements and a few others will contribute to a sustainable elevated margin profile and narrowing gap in growth versus quality tier-1 peers." Tech Mahindra will decide on wage hikes and the quantum in the fourth quarter of FY26 (January-March 2026). New deal wins were robust and broadbased across business segments. Total contract value (TCV) jumped 52% year-on-year to $809 million, boosted by two large deals worth $50 million each. That was TechM's highest TCV in 13 quarters and the third consecutive quarter with over $700 million. Tech Mahindra expects deal wins of $600-800 million every quarter. Deals are expected to start converting to revenue from the second quarter (July-August), with more expected in the second half of 2026, the management said. Faster and timely conversion of deals is crucial for Tech Mahindra to meet its objective of achieving revenue growth above the peer average by FY27. Macro challenges Tech Mahindra's constant currency revenue fell 1.4% sequentially in Q1, steeper than the estimated 0.8% fall. Revenue was hurt by continued weak discretionary tech spending by customers and delay in deal ramp-ups. The macroenvironment remains uncertain with continued weakness in the automotive, hi-tech, and manufacturing segments, the management cautioned. However, TechM's telecom business surprised with 0.4% sequential revenue growth in a seasonally weak quarter, supported by stabilisation in spending from top clients. But sustenance is crucial. Tech Mahindra has significant exposure to the communications sector (around 34% of revenue) that has been under stress lately, weighing on the information technology service provider's revenue growth trajectory versus peers. Despite the macro headwinds, Tech Mahindra expects FY26 revenue growth (in constant currency terms) to be better than FY25's 0.3% rise. But that may be a tall ask. 'Considering the Q1 weakness, the ask-rate for the rest of the year to achieve flat FY26 CC (constant currency) growth is about 0.8% CQGR (compound quarterly growth rate), which we believe is a little challenging, given the underlying macro uncertainties," PL Capital said in a report dated 16 July. Tech Mahindra's shares are up about 4% in the past year versus a drop in the sector index, Nifty IT. The company's turnaround efforts are showing some progress, which has rewarded the stock. But weak globaldemand may delay meaningful benefits of this strategic overhaul. Tech Mahindra has seen modest earnings downgrades by some brokerages post its first-quarter results. The stock trades at FY27 price-to-earnings multiple of 21x, showed Bloomberg data. 'Despite inferior margins and returns profile, TechM trades at a valuation comparable to large-cap peers," Nuvama Research said in a report dated 16 July. However, it added: 'Margin expansion will be even more difficult hereafter given the low-growth and weak macros and limited levers for expansion."
Mint
6 days ago
- Business
- Mint
Tech Mahindra starts the fiscal with caution and mixed signals
Tech Mahindra Ltd kicked off the fiscal with lower-than-expected revenue as low business outside its largest geographies dragged down growth, prompting the management to give out mixed signals on the road ahead. The Pune-based information technology (IT) outsourcer reported $1.56 billion in revenue for the April-June 2025 period, up 0.97% sequentially. Analysts expected better. A Bloomberg poll of 35 analysts expected the company to report $1.57 billion in revenue. A key reason for the slowdown in revenue growth is the business outside its biggest markets, the Americas and Europe. The company's revenue from markets outside its biggest geographies, which makes up a fourth of its revenues, declined 4.4% sequentially to $388 million. Still, much of the company's incremental revenue of $15 million was contributed by its communication business, which is also its biggest vertical, making up a little more than a third of its total revenue. For now, the management sounded cautious. 'The macro picture is still quite hazy. I feel that in certain sectors which have been, you know, impacted by tariffs and by demand activity, like auto, I think the sentiment is still not conducive to significant discretionary investments,' said Mohit Joshi, chief executive of Tech Mahindra, during the post-earnings press conference on Wednesday. Its commentary was similar to larger peer Tata Consultancy Services Ltd, which called out delays in decision-making and project implementation because of uncertain macroeconomic conditions. However, the third-largest IT services provider HCL Technologies Ltd said the macroeconomic conditions were stable and that it did not 'deteriorate as feared at the start of the quarter.' While TCS ended the first quarter with $7.42 billion in revenue, down 0.59% sequentially, HCLTech ended with $3.55 billion, up 1.34%. HCL guided for 3-5% revenue growth in constant currency terms for the full year. Like TCS, Tech Mahindra does not provide quarterly or yearly guidance. However, the management said it is too early to predict improvement or a further economic downturn. 'It's a mixed picture, and I feel that it's too early to say whether the tide has turned towards significant growth, or god forbid, towards a recession,' said Joshi. However, he added that deal wins will start ramping up from the second half. 'We expected that from Q2 onwards, as we said, and certainly the second half of the year, the deal wins that we've had will start contributing towards revenue growth rate,' said Joshi. Tech Mahindra reported new deal wins worth $809 million, up 44% on a yearly basis. In terms of geographies, the company gets almost half of its business from the Americas, which was also its best-performing market in the last quarter. A sore spot for the company was its net profit, which was $133 million, down 2.2% sequentially. However, a bright spot was Tech Mahindra's operating margins. Tech Mahindra reported 11.1% operating margins, up 60 basis points sequentially. One basis point is a hundredth of a percentage point. Chief financial officer Rohit Anand said the margins improved because of 'Project Fortius, operational levers such as favourable offshore mix' and 'continuous progress made on integration of portfolio entities.' The company's margin performance comes as a shot in the arm for its management, which seeks to increase its operating margin to 15% by March 2027 and grow its revenue faster than peers as part of a three-year road map called Project Fortius. Tech Mahindra aims to do so organically without any acquisitions, by investing in its key accounts and boosting growth in its non-telecom businesses, which have been the company's biggest cash cow in the past. At least one analyst was optimistic about the company's margin programme. 'Margin improvement despite revenue weakness is commendable and increases credence towards management's target of improving margins to 15% by FY27. We remain confident in the multiyear transformation ahead, which we back and remain positive about,' said Manik Taneja, executive director for IT services at Axis Capital. Still, the margin performance came at a cost to the headcount. Much like HCL, Tech Mahindra cut headcount by 214 employees to end last quarter with 148,517 people. HCLTech is the only company to have reduced headcount in the quarter. The company cut staff by 269 in April-June 2025 to end with 223,151 employees. As of now, TCS is the only company to add headcount last quarter. The country's largest IT service provider added 5,090 people in the first three months of the fiscal year to end with 613,069 employees. Churn in the lower end of Tech Mahindra's employee pyramid is followed by movement at the top. Since March 2024, thecompany's senior management has had at least 20 additions and exits. For now, this increase in headcount comes against the backdrop of a tariff war started by US President Donald Trump, coupled with geopolitical uncertainties. Both have put the IT expenditure of large companies, many of which count Tech Mahindra as their IT vendor, in limbo. The company's shares rose 1.94% to close at ₹ 1,609 on Wednesday. The 30-share benchmark BSE Sensex index closed 0.08% higher at 82,634.48 points. The earnings were announced after market hours.
Mint
30-06-2025
- Business
- Mint
Tech Mahindra: What can upset its apple cart
The Tech Mahindra Ltd stock is up 17% in the past year, beating sector index Nifty IT's 7% returns. The optimism stems from the company's ongoing efforts to revive its financial performance, which has lagged tier-1 peers due to a different vertical mix. Tech Mahindra has significant exposure to the communications vertical, which remains under stress. For competitors, a large part of their revenue comes from the relatively better placed banking, financial services and insurance sector. Going by Tech Mahindra's latest management commentary, it is on track to achieve four key objectives by FY27. These are: revenue growth above peer average, an Ebit (earnings before interest and tax) margin of 15%, return on capital employed of over 30%, and return of more than 85% of free cash flow to shareholders. True, the FY25 results indicate that Tech Mahindra is making gradual progress on select earnings a weak global economic backdrop could further hamper discretionary IT demand, putting the management's confidence to test. Tech Mahindra reported strong order wins with a total contract value of $2.7 billion, up 42.5% year-on-year. Deal wins were broad-based across key industries and markets, helping the company to diversify its portfolio. Tech Mahindra expects deal wins to be in a $600-800 million range per quarter. 'Despite strict governance on deals and programmes to get pricing increases, deal win velocity has increased. We believe that a successful turnaround is on the cards, leading to re-rating of multiples and an increase in Street earnings per share estimates," Kotak Institutional Equities said in a report dated 12 June. Tech Mahindra has revamped its sales team and go-to-market strategy, aiming to expand the deal pipeline and improve win rates. The company has adopted a selective approach to ensure margin-accretive deals. Margin improvement Its Ebit margin expanded by 360 basis points to 9.7% in FY25. This was driven by operational efficiencies, savings from Project Fortius (a plan to achieve a 15% operating margin), and the discontinuation of low-margin business. In the March quarter (Q4 of FY25), the Ebit margin improved for the sixth quarter in a row to 10.5%, ahead of consensus estimates. The management expects further margin improvement in FY26 with the help of the integration of portfolio companies, leading to a reduction in operational costs and increased utilisation. On the other hand, revenue growth has been modest. In FY25, Tech Mahindra achieved year-on-year revenue growth of 0.3%. In Q4, constant currency revenue fell 1.5% sequentially, impacted by project delays with a hi-tech client, amid macroeconomic uncertainty. On the Q4 earnings call, the management said although projects have not been cancelled, there have been deferrals and delays in decision-making. According to a recent Citi report, the macro environment is getting tougher – while it is difficult to quantify the impact, the downside risks have increased and are likely to weigh on multiples. 'Revenue trajectory has seen some impact given the macro uncertainty and impact on discretionary spends; particularly, in verticals like autos and hi-tech," it said. The global research house has a sell rating on the Tech Mahindra stock and warns of impact on Q1FY26 earnings from seasonality in Comviva, its digital solutions subsidiary. Additionally, valuations are above historical levels. At FY27 price-to-earnings, the Tech Mahindra stock is trading at 22x, showed Bloomberg data. This is higher than the 10-year average of 21x and almost in-line with larger peers Tata Consultancy Services Ltd and Infosys Ltd. Tech Mahindra is making the right moves that have helped it bridge the valuation gap with its peers. However, given the elevated macroeconomic uncertainty, the pace of execution is critical. Any miss on that front could mean a longer recovery path than the management's guidance.
Business Standard
27-06-2025
- Business
- Business Standard
Tech Mahindra Ltd Falls 0.21%
Tech Mahindra Ltd has added 6.77% over last one month compared to 4.43% gain in BSE Teck index and 3.03% rise in the SENSEX Tech Mahindra Ltd lost 0.21% today to trade at Rs 1687.35. The BSE Teck index is down 0.01% to quote at 18753.48. The index is up 4.43 % over last one month. Among the other constituents of the index, Mphasis Ltd decreased 0.09% on the day. The BSE Teck index went up 8.79 % over last one year compared to the 5.72% surge in benchmark SENSEX. Tech Mahindra Ltd has added 6.77% over last one month compared to 4.43% gain in BSE Teck index and 3.03% rise in the SENSEX. On the BSE, 1102 shares were traded in the counter so far compared with average daily volumes of 51311 shares in the past one month. The stock hit a record high of Rs 1807.4 on 12 Dec 2024. The stock hit a 52-week low of Rs 1209.7 on 07 Apr 2025.
