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ICICI Securities Report
Tech Mahindra Ltd.’s Q1 FY21 revenues declined 6.3% QoQ in constant currency (CC) terms. Margins improved sequentially by 10 basis points to 10.1% on reported basis.
Communication segment (40% of revenues) declined 8.2% in CC terms primarily due to weakness in network and added application solutions (VAAS ) services.
Supply-side issues (primarily in business process services (BPS) segment) meaningfully impacted Q1 revenues (causing 25% of revenue decline).
Net-new (NN) deal total contract was 290 million U.S. dollar in Q1 FY21 (475 million U.S. dollar in Q1 FY20); it was relatively lower due to deferral in deal closures in the first half of the quarter.
As supply-side issues ease, growth in BPS and network services in the coming quarter should help stabilise the revenue profile.
Pipeline continues to be healthy and the company expects margin accretion to continue in FY21. Normalised free cash flow/net income conversion was also healthy at approximately 200% in Q1 FY21.
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