Due to rising costs and customers cutting down on spending in the face of a challenging socioeconomic climate, India’s Tech Mahindra reported its largest profit decline in over 16 years on Wednesday.
Due to companies in the U.S. and Europe, who provide the majority of its revenue, scaling back expenditures out of fear of a recession, India’s information technology (IT) sector has been struggling with delays in dealmaking.
Leading providers of IT services, Tata Consultancy Services and Infosys, announced lower-than-expected revenue. Earlier this month, Infosys and HCLTech reduced their annual sales predictions.
Tech Mahindra saw a 61.6% decline in net profit for the quarter, its lowest level since March 2007.
While expenses increased by over 7%, primarily due to a 30% increase in “other expenses,” the combined revenue from operations decreased by 2.02% on an annual basis.
According to Piyush Pandey, head analyst at Yes Securities, “the near-term demand environment remains challenging as the telecom sector, on which Tech Mahindra has a high dependence, remains stressed.”
He went on to say that any comeback in revenue growth would probably occur in the next fiscal year.
From $716 million to $640 million in new business wins, Tech Mahindra experienced a decline in revenue.
The earnings before interest and tax (EBIT) margin of the company decreased from 11.4% to 4.7% in the previous year.
The analysts attributed the decline in EBIT margin to one-time costs stemming from the restructuring of many business units during the quarter.
In addition, the firm announced a dividend of 12 rupees per share and approved the absorption of three units, claiming this will reduce its overheads.
Tech Mahindra’s stock ended the day 1.2% lower than expected, with trade volume falling just short of 75% of the 30-day average.
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During the July–September quarter, Tech Mahindra Ltd.’s revenue growth stalled for the second consecutive quarter, highlighting the potential of a downturn to India’s $245 billion IT services sector. According to an exchange report on Wednesday, the Pune-based outsourcer’s revenue for the quarter ended September 30 dropped by 2.25% to Rs 12,863.9 crore, compared with the previous three months. In contrast, that amounts to Rs 13,244.6-
Key Highlights for Tech Mahindra Q2 FY24 (QoQ) Revenue at Rs 12,863.9 crore decreased by 2.25%. (Estimated by Bloomberg: Rs 13,244.6 crore) EBIT at Rs 457.1 crore decreased 48.73%. (Estimated by Bloomberg: Rs. 1,005.3 crore) 3.55% versus 6.77% for the EBIT margin. (Estimated by Bloomberg: 7.59%) Net profit at Rs 505.3 crore decreased by 28.18%. (Estimated by Bloomberg: Rs 799.6 crore) interim dividend per share of Rs 12.
To $1,555 million, the company’s dollar revenue decreased by 2.8%. Other Important Points Attrition rate on a trailing 12-month basis falls to 11%. There are 2,307 more workers overall, or 150,604 total. The September quarter saw $640 million in net new business wins. Tech Mahindra’s shares dropped 1.16% to Rs 1,141.70 on the BSE on Wednesday, while the benchmark Sensex finished the day 0.81% lower at 64,049.06 points.