Tech Mahindra Q4 Results: Profit Falls More Than Expected, Margin Narrows Sharply

Tech Mahindra Ltd.’s quarterly profit fell more than estimated as Covid-19 pandemic stalled economic activity and spending across the globe.

Net profit fell 30 percent sequentially to Rs 804 crore in the January-March period, according to the IT company’s exchange filing. The consensus estimate of analysts tracked by Bloomberg had pegged the bottom line at Rs 1,002 crore.

• Revenue fell 1.7 percent quarter-on-quarter to Rs 9,490 crore as against the estimated Rs 9,720 crore.
• Revenue in dollar terms fell 4.3 percent to $1,294.6 million compared to an estimated $1,335 million.
• Operating profit fell 38 percent to Rs 732.1 crore.
• Margin narrowed 450 basis points to 7.7 percent.

The pandemic, and consequent lockdowns in India, the U.S. and European nations has disrupted the software services industry, impacting revenue. And Tech Mahindra hasn’t been immune to this. While the firm hasn’t seen any significant deal cancellations, its operations have not been running at full capacity as clients struggled with the lockdown.

The demand traction seen through the first three quarters of FY20 has been “reversed” now, CP Gurnani, the company’s chief executive officer and managing director, said in a statement. “Covid-19 has brought an unprecedented change in business model for the IT industry.”

Things could get tougher, though. For the Indian IT sector, the outlook for 2020-21 is “hazy” as Covid-19 may cause a decline in global spending, Kotak Institutional Equities had said in a prior report.

“Efficient operations, cost optimization and delivery automation will be the key focus areas going into the next year,” Chief Financial Officer Manoj Bhat was quoted as saying in the statement. “Our strong balance sheet combined with a focus on cash conservation will help us tide over the volatility in near term, as we look to emerge stronger and leaner to capture opportunities ahead.”

On Thursday, Tech Mahindra shares rose 3.26 percent to Rs 545.95 apiece on the NSE while the benchmark Nifty 50 gained 3.21 percent to end the day at 9,859.90 points. Tech Mahindra's quarterly results were declared after market hours.