TechM deal pipeline strongest in 3 years

Tech Mahindra on Monday reported a 1.35 per cent jump in June quarter net profit at Rs 972.3 crore amid the COVID-19 pandemic and said it is targeting to emerge stronger by the end of calendar year 2020.

As compared to the preceding March quarter, the net profit of the country's fifth biggest software exporter grew over 20 per cent, but the management was quick to point that there were impairments on the back of provisions made for COVID-19.

Revenues rose to Rs 9,106 crore, up 5.23 per cent when compared with the year-ago period, but down 4 per cent sequentially.

Its chief executive C P Gurnani told reporters that the figures are much better than what the Mahindra Group company had initially budgeted for and without giving any numbers, affirmed its commitment to become "leaner and stronger" by the end of the year.

The company's overall headcount came down by 1,820 employees to 1,23,416 during the quarter, which was attributed to performance reviews of staff and regular attrition.

The firm's Chief Financial Officer Manoj Bhat said three-fourths of the revenue impact came because of issues on the demand side.

He added the largest impact was on business process services (BPS) segment where the revenue was down 13 per cent on a sequential basis.

He said over 90 per cent of its employees have started to work from home, which will take care of the supply side constraints, and added that the company also expects the BPS segment to better by the end of the year.

Gurnani said the company closed deals of USD 300 million during the quarter, led by the enterprise and communication segments.

He added that the number of deals it is negotiating at present is a three-year high, but made it clear that deals are getting longer to fructify as the apprehensive clients do not sign on.

From a geographical perspective, the Middle East is a concern because of issues surrounding low oil prices, while the airline sector also continues to be weak because of the pandemic-induced travel bans, Gurnani said.

On the margins front, the operating profit margin improved slightly to 10.1 per cent during the quarter and was helped majorly by the positives on the currency front, Bhat said.

Analysts at brokerage Sharekhan said the numbers are better-than-expected on all fronts.

The company's scrip gained 1.73 per cent to close at Rs 664.05 apiece on the BSE on Monday, as against a correction of 0.51 per cent on the benchmark.

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