Tech Mahindra Posts Strongest Sequential Revenue Growth in 13 Quarters

Tech Mahindra Ltd. reported its best sequential revenue growth in 13 quarters for the July–September period, driven by broad-based gains across most business verticals and its core American market. The company’s operating margin expanded for the eighth consecutive quarter.

The consolidated net profit rose nearly 5% on quarter to ₹11.95 billion, while revenue increased almost 5% to ₹139.95 billion. In constant currency terms, revenue rose 1.6% sequentially but fell 0.3% on year.

Revenue from the IT services business, which accounted for 84% of the company’s total top line, grew 4% sequentially to ₹117.67 billion. The business process services segment, which makes up the remaining 16%, saw a 7% sequential rise to ₹22.28 billion.

The company said its total contract value grew due to strong deal conversions, with new deal wins worth $816 million in the reporting quarter, higher than the previous quarter.

For the six months ended September 30, consolidated net profit rose 11% on year to ₹23.35 billion, while revenue increased almost 4% to ₹273.46 billion. The board announced an interim dividend of ₹15 per share, with October 21 as the record date.

Tech Mahindra’s earnings before interest and tax margin improved 108 basis points sequentially and 254 basis points on year to 12.1%. EBIT rose 15% on quarter and nearly 33% on year to ₹16.99 billion.

Total expenses rose almost 4% sequentially to ₹123.73 billion, while free cash flow increased sharply to $237 million from $86 million a quarter ago.

Segment and Geography Performance
Most verticals, including manufacturing, technology, media and entertainment, and banking, financial services and insurance, recorded sequential growth. The core communications vertical, which contributes about 33% to overall revenue, saw a decline both sequentially and on year.

Revenue from manufacturing rose over 5% on quarter and on year, while BFSI increased nearly 4% sequentially and 6% on year. Retail, logistics and transport grew 9% on quarter and 7% on year. The healthcare and life sciences business, accounting for 7% of revenue, rose 2.3% sequentially but declined 1.2% on year.

In terms of geography, revenue from the Americas rose 2.6% on quarter but fell 2.7% on year. Europe saw a 1.2% sequential decline but grew almost 6% on year, while revenue from the rest of the world increased about 2% sequentially.

Headcount and Clients
The company’s IT services headcount fell by 1,459 on quarter to 78,528 as of September. Business process services headcount increased to 66,095 from 60,278 a quarter ago. Employee utilisation stood at 84.4%, slightly lower than the previous quarter.

Tech Mahindra added three clients in the $20-million category and one in the $5-million group, while the number of clients in the $10-million and $1-million categories declined. Revenue from the top five clients accounted for 16% of total revenue, and from the top 10 clients for just over 24%