Tech Mahindra Expects Deal Flow To Improve

Tech Mahindra Ltd. expects deal flow to improve but that may weigh on its margins in the near term.

The software services firm also expects the manufacturing vertical—which contributes 18-20 percent to its overall revenue—to no longer drag the enterprise segment.

Here are key highlights from the analyst meet compiled from the brokerage reports of Morgan Stanley, UBS, Edelweiss and Bank of America Merrill Lynch:

Communications

• The company has indicated high double-digit growth for financial year ending March 2020.
• The company offers niche network services where returns could be among the highest.
• The acquisition of DynaCommerce India Pvt. Ltd. to aid growth.
• The company has increased spends on digitisation of business support systems.
• The company is also spending more on customer experience.
• Focus on media verticals has led to signing of 14 customers over the last year.
• The company said different regions are in different maturities in 5G adoption. It, however, did not give timelines on revenue accruals from 5G.

3-4-3 Strategy Updates

The strategy, implemented in 2017, is as follows:

• 3 trends—explosion of connected devices, emerging tech and content consumption.
• 4 big bets—Generation of experience, business, platform and infrastructure.
• 3 objectives—Run better, change factor and grow greater.
• The company said the strategy is bearing fruit.

Enterprise Business Looking Up

• See recovery in enterprise business in 2020.
• Deal pipeline in FY20 has grown 20 percent this year.
• Large deals, specifically in enterprise business, have grown two times.
• Quality of revenues aided by digital and platform-based business.

Near-Term Headwinds For Margins

• Margins in the near term could be under some pressure.
• This is on account of costs associated with ramp-up in large deals.
• Attrition has been improving of late.