Q1 Results: Tech Mahindra’s Profit Falls 15%, Margin Misses Estimates
Profit fell 15 percent to Rs 959 crore on a sequential basis in the quarter ended June
Tech Mahindra Ltd.’s quarterly earnings missed analysts’ estimates as rising wages and visa costs weighed on profitability.
Profit fell 15 percent to Rs 959 crore on a sequential basis in the quarter ended June. That compares with the Rs 987-crore profit forecast by analysts tracked by Bloomberg.
Revenue slipped 2.7 percent to Rs 8,653 crore on a quarterly basis missing the Rs 8,892-crore metric pegged by analysts. In dollar terms, the metric fell 1.7 percent to $1,247 million for the quarter on a sequential basis. Analysts had forecast $1,252 million.
Operating profit fell 27 percent quarter-on-quarter to Rs 993 crore—analysts had forecast Rs 1,162 crore. Operating margin plunged 410 basis points to 11.5 percent over last quarter.
Business seasonality affected revenue and margin this quarter, the company’s Chief Financial Officer Manoj Bhat said in a statement accompanying the filing. “Our focus on automation and AI will help realise operational efficiencies as we look to accelerate growth through the year.”
Bhat said in a post-earnings conference that wage hikes had affected margin by nearly 100 basis points. Seasonality in mobility business and H-1B visa costs, he said, pulled down revenue and margin by another 100 basis points. The company’s strategy for the next two quarters, according to him, is faster pace of digital growth. “Which means we have to get into the invest phase.”
Tech Mahindra’s employee costs jumped nearly 4.5 percent over last quarter to Rs 4,500.9 crore in the three-month period. Sub-contracting expenses, too, rose by nearly 4 percent quarter-on-quarter to Rs 1,219.7 crore.
Edelweiss Securities had expected the company’s revenue to marginally decline in constant currency terms while currency headwinds will weigh on the dollar-revenue growth. Operating margin, according to its note, was expected to contract 200 basis points owing to seasonality in its subsidiary Comviva, H-1B visa fees, rupee appreciation and wage hikes.
Financial year 2021 will be the year of rollout for 5G technology while the current fiscal is for getting ready for the same, the company’s Chief Executive Officer CP Gurnani told BloombergQuint. There’s an uptake in 5G and it’s probably linked to capital and frequency allocation, he said, adding that in the current fiscal, they will be doing a few pilot runs.
Shares of the company ended 0.93 percent lower on the BSE ahead of the results announcement to close at Rs 640.30 apiece.
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