Tech Mahindra Q3 Net Profit Dips 4.7% to Rs 1,146 Cr

Mumbai, Jan 31 (PTI) Tech Mahindra, the country's fifth largest IT exporter, on Friday reported a 4.7 per cent decline in December quarter consolidated net profit at Rs 1,146 crore on rising costs, which crimped margins.

The Mahindra group company, however, said that when compared with the preceding three months, the October-December revenue growth has come at a 16-quarter high of 6.4 per cent to Rs 9,655 crore.

Despite 7.94 per cent growth in revenue, the cost of services grew at a faster 12.50 per cent to Rs 6,731 crore, leading to a decline in profits. It closed new deals of over USD 1.23 billion during the reporting quarter and added that the pipeline in all its key segments is very healthy.

Chief Financial Officer Manoj Bhatt told reporters that booking revenues from a big deal win in Q2 had led to a jump in revenues from a sequential perspective, and added that the revenue growth will be "muted" in the March quarter.

He said the margins, which declined by 0.30 per cent sequentially to 16.2 per cent, will also be muted in the last quarter of the fiscal, which is contrary to the usual trend.

Bhat explained that the margin was impacted due to deal transition costs which will continue to depress it in the next quarter as well, and also due to rise in selling, general and administrative expenses.

The company's total headcount declined by 683 people to 1,30,839 employees. Bhat clarified that this was due a single business process services contract and not structural. He, however, did not give an outlook on hiring.

The company's Chief Executive and Managing Director C P Gurnani said it has signed up a USD 900 million, seven year deal in the enterprise segment which will involve absorbing a few employees of the client.

Head of the enterprises business Vivek Agarwal clarified that it did not have to cut on margins to win the mega deal, which is the biggest in the enterprise segment it has bagged ever.

Gurnani said the core communication segment did well with 8.9 per cent growth sequentially, while manufacturing is seeing early signs of revival though aerospace industry in the US and auto sector continue to face headwinds.

On the telecom front, 5G rollout the world over is leading to a spurt in conversations about new deals and companies are back to investing, he said.

Tech Mahindra serves all the three major domestic telcos and Gurnani sounded positive about the domestic clients as well on their ability to charge higher, but also acknowledged that events like the Supreme Court judgement on AGR are a worry.

The company on Friday also announced acquisition of 70 per cent stake in Bengaluru-based Cerium Systems for USD 24.5 million to shore up its capabilities on the chip conductors front. The company has 850 employees and its silicon engineering capabilities will be useful in serving 5G and autonomous cars-related clientele, Agarwal said.

The company said the new age digital stream grew 10 per cent sequentially and now contributes 41 per cent of its revenues.

It sees minimal impact of the coronavirus-related incidents and Bhat said the focus is to take care of the associates who are present in the affected regions, while Gurnani said its revenues will be impacted if there is an impact on any client.

Gurnani said Brexit will not impact it as the clients have already strategised and there will not be any upheaval as the exit of Britain from the EU gives businesses a certainty.

Bhat said going ahead, yield management and upping the margins will be a key focus area for the company. The company scrip gained 0.51 per cent up at Rs 795.40 apiece on the BSE, as against a correction of 0.47 per cent on the benchmark.

(This is an unedited and auto-generated story from Syndicated News feed, LatestLY Staff may not have modified or edited the content body)