Tech Mahindra Q1 Results: Profit Rises, Margin Improves Despite Pandemic Disruptions
Tech Mahindra’s Hyderabad campus. (Photographer: Dhiraj Singh/Bloomberg)

Tech Mahindra Q1 Results: Profit Rises, Margin Improves Despite Pandemic Disruptions

Tech Mahindra Ltd.’s quarterly profit rose despite sluggish client spending and disruptions from the Covid-19 pandemic.

Net profit rose 21% sequentially to Rs 972 crore in the quarter ended June, according to its exchange filing. That compares with the Rs 748.5-crore consensus estimate of analysts tracked by Bloomberg.

  • Revenue in U.S. dollar terms declined 6.7% over the preceding three months to $1,208 million. Analysts had pegged the metric at $1,185 million.
  • Revenue in rupee terms declined 4% to Rs 9,106 crore—higher than the estimated Rs 9,000 crore.
  • Earnings before interest and tax rose 25% to Rs 917 crore.
  • EBIT margin expanded to 10.1% from 7.7% in the preceding quarter. Margin improved due to higher one-off expenses in the previous quarter.

The virus outbreak stalled all economic activities, barring essential services, as it forced India to impose the world’s biggest lockdown for over two months. That led to a rise in costs for IT firms as most employees worked from home. And as the pandemic gripped the rest of the world, software services exporters also lost billings as they generate most of their business overseas and the bulk of it comes from overseas clients in financial services, manufacturing and communications sectors.

Still, the company reduced costs to ensure that profitability is maintained. “Despite demand uncertainty and volume reduction, we have been able to demonstrate operational resilience through cost optimisation,” Chief Financial Officer Manoj Bhat was quoted as saying in a media statement. “Cash conversion has been strong, while we aim to improve profitability margins as demand normalises.”

Tech Mahindra’s larger peer Tata Consultancy Services Ltd., too, saw its profit and margin decline in the first quarter. While Infosys Ltd.’s profit fell, deal wins and cost cuts cushioned margin. Infosys and HCL Technologies Ltd. also resumed the practice of offering annual guidance. Wipro Ltd. managed to report a rise in bottom line during the first quarter.

Shares of Tech Mahindra closed 1.73% higher ahead of the results compared with a 0.5% drop in the benchmark BSE Sensex.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.