Tech Mahindra Q1 Results: Records 38% YoY Decline in Net Profit to Rs 693 Crore
Tech Mahindra Q1 Results
Tech Mahindra’s Total Contract Value Declines to $3590 Million, a 39.36% Drop from the Previous Quarter
Tech Mahindra, a leading IT services company, faced a challenging quarter in Q2 2023 as its total contract value witnessed a significant decline.
The company’s total contract value stood at $3590 million, down by a substantial 39.36% from the previous quarter’s $5920 million.
This dip in contract value reflects the prevailing difficulties faced by the company during this period.
Tech Mahindra’s Revenue Falls to $1600.7 Million, a 4% Decrease on a Quarterly Basis
In Q2 2023, Tech Mahindra experienced a downturn in revenue, registering a 4% decrease on a quarterly basis. The company’s revenue for the quarter amounted to $1600.7 million (equivalent to Rs 13,159 crore).
Unfortunately, this figure fell short of analysts’ estimates, indicating that the performance was not as robust as anticipated.
Constant Currency Revenue Decline of 4.2% Puts Tech Mahindra Behind Competitors
The challenges for Tech Mahindra extended beyond its overall revenue decline. In terms of constant currency, the company’s revenue took a hit of 4.2%.
This decrease represents the largest among its competitors in the IT services industry. The decline in revenue was notable when compared to industry peers like Wipro and HCL Tech, who also reported a reduction in their respective revenues during the same quarter.
CEO CP Gurnani Acknowledges the Quarter as One of the Toughest in the Last Five Years
Chief Executive Officer CP Gurnani candidly acknowledged the difficulties faced by Tech Mahindra during Q2 2023. In his statement, he referred to this particular quarter as one of the toughest the company has experienced in the last five years.
The CEO’s admission highlights the severity of the challenges and uncertainties the company encountered during this period.
Tech Mahindra’s Annual Profit Plummets by 38 Percent: Margins Take a Severe Hit
Annual Net Profit Witnesses a Sharp 38 Percent Decline YoY
Tech Mahindra faced a significant downturn in its financial performance as the company reported a 38 percent year-on-year decline in its net profit.
For the first quarter ended June 30, the net profit stood at Rs 692.5 crore, a substantial drop from Rs 1,147.5 crore recorded in the same quarter of the previous financial year.
This substantial decrease in annual profit indicates the challenges and headwinds the company faced during this period.
Quarterly Net Profit Declines by 38 Percent
The financial struggles continued for Tech Mahindra on a quarterly basis as well. When compared to the fourth quarter of the previous financial year, the net profit in the first quarter registered a decline of 38 percent.
The net profit for the first quarter stood at Rs 692.5 crore, down from Rs 1,125 crore recorded in the previous quarter.
This notable decline in quarterly net profit reflects the severity of the challenges that the company grappled with during this quarter.
Margins Experience a Drastic Decline, Hitting the Lowest Among Competitors
Tech Mahindra’s financial woes were exacerbated by a significant hit to its margins, which fell more than anticipated.
The EBIT (Earnings Before Interest and Taxes) margin came in at 6.8 percent, experiencing a substantial drop of 440 basis points from the previous quarter’s 11.2 percent.
This downturn in EBIT margin indicates the company’s struggle to maintain profitability and cost efficiency during the quarter.
Tech Mahindra’s Weakest Figure Among Competitors
The impact of the declining margins was profound, as Tech Mahindra’s EBIT margin of 6.8 percent became the weakest among its competitors in the IT services industry.
The company’s inability to protect its margins adequately put it at a disadvantage when compared to its peers in the market.
Continued Struggle to Protect Margins
Tech Mahindra’s financial performance highlights an ongoing challenge in safeguarding its profit margins.
The company’s margins have persistently remained the lowest among its competitors, indicating the need for effective strategies to address cost management and operational efficiency.
Tech Mahindra’s Total Contract Value (TCV) Drops Significantly by 39.36 Percent
Tech Mahindra faced a substantial decrease in its Total Contract Value (TCV) or deals done during the quarter.
The TCV stood at $3,590 million, indicating a notable decline of 39.36 percent from the previous quarter’s TCV of $5,920 million.
Moreover, when compared to the same quarter of the previous year, the TCV plummeted by a staggering 55.24 percent from $8,020 million. This sharp decline in TCV reflects the challenging market conditions and business environment that the company navigated during the quarter.
Tech Mahindra’s Employee Strength Declines to 4,103, Marking a Third Consecutive Quarterly Reduction
Tech Mahindra’s employee strength witnessed a decline for the third consecutive quarter. During the current period, the company’s workforce came down to 4,103 employees.
This net reduction of over 15,000 employees during this period highlights the company’s efforts to optimize operations and adjust to the prevailing economic conditions.
Notably, even as Tech Mahindra experienced a decrease in its workforce, the attrition rate dropped to 13 percent, indicating efforts to retain talent amidst challenging times.
CEO CP Gurnani Attributes Financial Performance to Global Economic and IT Sector Uncertainty
In response to the company’s financial performance during the quarter, Tech Mahindra’s CEO and MD, CP Gurnani, emphasized the uncertainty surrounding the global economy and the IT sector.
The challenging business landscape, coupled with external factors, had a significant impact on the company’s numbers and overall performance during the period.
Positive Outlook and Confidence in Tech Mahindra’s Strategy
Despite the temporary setback in performance, CEO CP Gurnani expressed confidence in the company’s ability to overcome the challenges.
He affirmed that Tech Mahindra has the right strategy in place and a competent team to navigate through the difficulties and deliver long-term value to its customers and shareholders.
The company remains committed to implementing measures that would drive growth and profitability in the future.
In conclusion, Tech Mahindra faced multiple challenges during the quarter, with a significant decline in Total Contract Value (TCV) and a continued reduction in its employee strength.
The company’s CEO acknowledged the impact of global economic uncertainty and its effects on the IT sector.
Despite these challenges, Tech Mahindra remains optimistic about its future and believes that the right strategy and competent team will drive success and value for all stakeholders in the long run.
