Tech Mahindra Q2 Results: Profit Rises, Margin Expands As Pandemic Impact Fades Away

Tech Mahindra Ltd.’s quarterly profit rose as the pandemic’s impact on information technology firms started to fade.

Net profit rose 11% sequentially to Rs 1,063 crore in the quarter ended September, according to its exchange filing. That compares with the Rs 989-crore consensus estimate of analysts tracked by Bloomberg.

• Revenue in U.S. dollar terms rose 4.8% over the preceding three months to $1,265.4 million. Analysts had pegged the metric at $1,246 million.
• Revenue in rupee terms rose 3% to Rs 9,371.8 crore—higher than the estimated Rs 9,258 crore.
• Operating profit rose 31% to Rs 1,703 crore.
• Margin expanded 390 basis points to 18.2%.

Indian IT companies saw their costs rise over the last two quarters as employees worked from home after the pandemic froze economic activity across the globe. Firms even lost billings as the outbreak hit even overseas clients that generate bulk of Indian IT’s revenue.

The scenario, however, has changed since. Tech firms resolved a lot of supply-side bottlenecks and secured new deals that have helped them tide over the pandemic. Improved prospects of digital services, too, has offset the disruption.

“We are witnessing demand revival across multiple segments, as customers have accelerated their pace of digital transformation,” Managing Director and Chief Executive CP Gurnani said in a media statement. The company will look to capture increased spends on “consumerisation” to stay relevant in the current environment, he said.

The results underscore an increasingly optimistic outlook for Indian IT among analysts and companies alike. While client spending on IT is estimated to fall 7.3% this year, the recovery is expected to be faster and smoother than the rest of the economy, according to Gartner.

“With the easing of lockdown restrictions, many enterprises will soon return to a higher level of revenue certainty allowing some cash flow restrictions to ease and CIOs to resume spending on IT again,” the industry tracker had said in its July update.

Tech Mahindra's board also declared a special dividend of Rs 15 per share that will be paid on Nov. 12. The record date fixed for the dividend is Nov. 2.

Shares of Tech Mahindra closed 1.3% higher before the results were announced, compared with a 0.28% rise in benchmark Nifty 50 Index.