Tech Mahindra, the telecom-focussed company, has restructured debt bringing down interest cost, improved operating margins despite a rise in pay, and also now has Satyam Computer Services with several clients in many industries helping it reduce the risk of concentration in telecom.
Amidst tepid revenue growth and falling profit sans extraordinary and non-operating items, the positive takeaway is the company’s growing presence in the domestic market and improvement in vendor accounts other than its biggest client BT.
At Rs 1,141.8 crore, revenue during the September quarter increased sequentially by 2.6% and fell by 2% from the year-ago period. Net profit grew 28.4% sequentially and fell by 44% annually to Rs 169 crore. Excluding non-operating items such as forex gain or loss and extraordinary items such as one-time interest outgo, the double-digit profit growth will reduce to a sequential rise of 7% and an annual drop of 43.6%.
A positive signal is that TechM has reported expansion in operating margin despite a salary hike of 6% for offshore and 2% for onsite. It is a result of 400-basis point improvement in utilisation. It has also restructured half of its total debt of Rs 2,179 crore at lower interest rates.
Tech Mahindra (TechM) is a niche IT exporter which provides services to global telecom players. Hence, its performance is closely watched to get cues about the state of telecom sector in various geographies, which are also serviced by other IT giants in India.
TechM has shown a sequential decline in revenue from BT in the second quarter estimated to be 6.5%. It reflects contract renegotiations at discounted prices. Further, the account is witnessing stagnation for the past few quarters due to BT’s poor performance.
| NIFTY 
