- India’s Tech Mahindra posted its biggest fall in profit in over 16 years as expenses mounted and clients tightened spending.
- Top IT services providers Tata Consultancy Services and Infosys reported lower-than-expected revenue.
- Infosys along with HCLTech cutting annual revenue forecasts earlier this month.
- “Near-term demand environment remains challenging as the telecom sector, on which Tech Mahindra has a high dependence remains stressed,” said an expert.
- Analysts cited one-off expenses due to the restructuring of various business operations in the quarter for a fall in EBIT margin.
- Tech Mahindra is an Indian multinational information technology services and consulting company. Part of the Mahindra Group, the company is headquartered in Pune.
India’s Tech Mahindra posted its biggest fall in profit in over 16 years as expenses mounted and clients tightened spending amid a tough macroeconomic environment.
India’s information technology (IT) industry has been grappling with delays in dealmaking, as businesses in the U.S. and Europe, from where it draws the bulk of revenue, cut back investments amid fears of a recession.
Top IT services providers Tata Consultancy Services and Infosys reported lower-than-expected revenue, with Infosys along with HCLTech cutting annual revenue forecasts earlier this month.
Tech Mahindra’s net profit for the quarter fell 61.6%, its worst performance since March 2007. Consolidated revenue from operations fell 2.02% year-on-year, while expenses rose nearly 7%, led by a 30% jump in “other expenses.”
“Near-term demand environment remains challenging as the telecom sector, on which Tech Mahindra has a high dependence remains stressed,” said an expert.
Any recovery in revenue growth will likely happen in the next financial year, he added. Tech Mahindra’s new deal wins fell to $640 million from $716 million a year ago. The company’s earnings before interest and tax (EBIT) margin contracted to 4.7% from 11.4% a year ago.
Analysts cited one-off expenses due to the restructuring of various business operations in the quarter for a fall in EBIT margin. The company also approved the absorption of three units, which it said would result in a reduction of its overheads, along with announcing a dividend of 12 rupees per share.
Shares of Tech Mahindra closed 1.2% lower ahead of results, with trade volume just shy of three-quarters of the 30-day average.
Tech Mahindra is an Indian multinational information technology services and consulting company. Part of the Mahindra Group, the company is headquartered in Pune and has its registered office in Mumbai. Tech Mahindra is a US$6.0 billion company with over 148,000 employees across 90 countries. The company was ranked #5 in India’s IT firms and overall No. 47 on Fortune India 500 list for 2019.
(With inputs from agencies)
