Tech Mahindra Q4 profit falls 29% to Rs 804 cr

IT services firm Tech Mahindra on Thursday reported 29 per cent dip in March quarter consolidated net profit at Rs 803.9 crore owing to narrowing of margins due to factors including a surge in COVID-19 related costs.

For the 2019-20 financial year, the Mahindra group company reported 6.15 per cent decline in net profit at Rs 4,033 crore. In December quarter, the profit stood at Rs 1,145.9 crore.

It can be noted that a slew of its peers in the IT sector are reporting lower than normal profit growths and also flagging concerns about the business going forward.

Tech Mahindra's CEO and MD C P Gurnani said it has been a "tough quarter" on the overall basis, but underlined that the company has been able to take care of the immediate concerns to ensure that work can be done remotely during the lockdown.

Over 90 per cent of its employees in India are working from home at present, Gurnani said, adding that over a fourth of the overall staff will continue to work from home in the post-COVID-19 world as well.

He said the presence of very high level of scrutiny over privacy in geographies like Europe and Australia and New Zealand led to some difficulties in shifting to work-from- home, but the same has been taken care of now.

The company has decided to hold back performance bonuses and incentives for the MD and senior management because of the COVID-19 impact, while assuring that the junior associates' salaries will not be touched.

Gurnani also said there will not be any yearly hike announcement at least for the next six months.

However, when compared to December quarter, the total number of employees reduced by over 5,000 to 1.25 lakh, which was attributed to reduction in the business process services vertical.

When asked if there will be any layoffs due to coronavirus pandemic, Gurnani said that unless an entire line of business is being affected, there will not be any actions contrary to an individual or society's liking by the company.

During the March quarter, its overall revenues rose 6.72 per cent to Rs 9,490 crore, while the operating margin narrowed by 4 percentage points to 14.2 per cent (the same stood at 16.2 per cent in the quarter-ago period).

Chief Financial Officer Manoj Bhat said the profit margins are affected by an impact on provisions made for COVID-19 setbacks (1 percentage point), transitions in the new deal wins in previous quarter (up to 0.70 per cent) and also the marginally lower employee utilisation at 83 per cent.

In the first 45 days of the quarter, it signed new deal wins of USD 500 million, but later the entire focus just shifted to the business continuity side, Gurnani said.

He, however, declined to give a direct picture on the demand environment at present, but hoped that the pandemic will accelerate deployment of the 5G telecom networks, which is one of the biggest bets for the company.

The company scrip gained 3.26 per cent to close the session at Rs 546.10 on the BSE.

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