Tech Mahindra , a leading global provider of digital transformation, consulting, and business re-engineering services, has announced its financial results for the first quarter, showcasing robust growth but falling short of market expectations.

Financial Highlights

• Revenue: Tech Mahindra reported a revenue of ₹13,351.00 crores, representing a 2.7% year-over-year (YoY) increase.
• Net Profit: Consolidated Profit After Tax (PAT) stood at ₹1,141.00 crores, up 34% YoY, but below Street estimates of ₹1,211.00 crores.
• EBIT (Earnings Before Interest and Taxes): The company's EBIT surged to ₹1,477.00 crores, marking a significant 34% YoY growth.
• EBIT Margin: The EBIT margin improved substantially, expanding by 260 basis points YoY to reach 11.06%.
• Earnings Per Share (EPS): Diluted EPS for the quarter was ₹12.86.

Operational Performance

Tech Mahindra continued to demonstrate strong operational efficiency and business growth:

• New Deal Wins: The company secured new deals with a Total Contract Value (TCV) of $809 million, representing a robust 51% YoY growth.
• Client Metrics: The number of $50 million+ clients increased to 26, up by 2 compared to the previous year.
• Headcount: Total headcount reached 148,517, with a net addition of 897 employees YoY.
• Attrition: The attrition rate increased to 12.8% from 11.8% in the previous quarter.

Management Commentary

Mohit Joshi, CEO and Managing Director of Tech Mahindra, stated, "Our performance is steadily strengthening, reflecting disciplined execution and a focused strategy. Deal wins have increased by 44% on a last twelve months (LTM) basis, supported by broad-based momentum across verticals and geographies."

Rohit Anand, Chief Financial Officer, added, "We have delivered seven consecutive quarters of margin expansion - a clear reflection of the discipline and focus across our organization. Even in an uncertain environment, our Project Fortius program continues to generate meaningful results and drive operational improvements."

Strategic Initiatives and Partnerships

Tech Mahindra has been actively pursuing strategic initiatives to enhance its capabilities and market presence:

• The company launched a new managed services offering for Cisco Multicloud Defense, providing enterprises with robust cloud security solutions.
• Tech Mahindra was named a Red Hat Premier Partner globally, gaining access to technical resources and joint go-to-market opportunities.
• The company announced partnerships with ServiceNow, CrateDB, and KOGO AI to deliver next-generation solutions in areas such as broadband, data management, and enterprise AI.

Outlook

Despite missing Street estimates, Tech Mahindra's strong deal pipeline, improved profitability metrics, and strategic partnerships position it well for continued growth. The company's focus on AI-driven solutions and digital transformation services is expected to drive further business opportunities across various industry verticals.

As Tech Mahindra continues to expand its capabilities and client base, investors and industry observers will be watching closely to see how the company capitalizes on the growing demand for digital and AI-enabled services in the global market, while addressing any concerns related to the slight underperformance against market expectations and the increase in attrition rate.

Tech Mahindra , a leading Indian IT services company, is expected to report a significant increase in its Profit After Tax (PAT) for the first quarter, despite facing some revenue challenges. The company's financial performance showcases resilience in a dynamic market environment.

Projected Financial Performance

Tech Mahindra is anticipated to report a remarkable 42.00% year-on-year (YoY) increase in PAT for Q1. This substantial growth in profitability comes even as the company faces a projected decline in constant currency revenue.

Revenue Challenges

The company is expected to experience a slight dip in its top line, with constant currency revenue projected to decline by 0.50% to 1.00% quarter-on-quarter (QoQ). This decrease is primarily attributed to two factors:

1. Weakness in the hi-tech vertical
2. Seasonal softness in the Business Process Outsourcing (BPO) segment

Deal Wins and Business Momentum

Despite the revenue challenges, Tech Mahindra is showing strong business momentum in terms of new deal acquisitions. The company is estimated to secure deals with a Total Contract Value (TCV) of approximately $750.00 million. This figure represents an improvement from the previous quarter, indicating a robust pipeline and continued client trust in Tech Mahindra's services.

Margin Improvement

On a positive note, Tech Mahindra is expected to see an improvement in its profit margins. This enhancement is attributed to two main factors:

1. Benefits from Project Fortius: This internal initiative likely focuses on operational efficiency and cost optimization.
2. Rupee Depreciation: The weakening of the Indian Rupee against major currencies typically benefits Indian IT services companies that earn a significant portion of their revenue in foreign currencies.

Conclusion

Tech Mahindra's projected financial performance for Q1 presents a mixed picture. While the company faces some headwinds in revenue growth, particularly in its hi-tech vertical and BPO business, it demonstrates strong profitability growth and improved deal-winning capabilities. The anticipated margin improvement, driven by internal initiatives and favorable currency movements, further underscores the company's ability to maintain financial health in a challenging business environment.

Investors and industry observers will be keen to see how Tech Mahindra navigates these dynamics and capitalizes on new opportunities in the evolving global IT services landscape.