Tech Mahindra Q1 net profit drops 39% to ₹693 cr

Net profit of software services firm Tech Mahindra plunged 39% year-on-year to ₹693 crore for the quarter ended June compared with ₹1,131 crore in the corresponding period last year.

The IT company's revenue from operations rose 3.5% year-on-year to ₹13,159 crore. On a sequential basis, revenue was down 4.1%. In dollar terms, revenue stood at $1,601 million, down 2% Y-o-Y and 4% quarter-on-quarter (QoQ).

Tech Mahindra's earnings before interest, taxes, depreciation, and amortisation (EBITDA) fell 29% year-on-year to ₹1,338 crore.

The software firm's total headcount stood at 148,297, down by 4,103 quarter-on-quarter.

New deal wins more than halved to 359 during the April-June quarter from 802 in the year-ago period.

The number of active clients fell to 1,255 for the first quarter from 1,262 in Q1 FY23.

Segment-wise, revenue from the communications, media and entertainment (CME) industry dropped 8% year-on-year, while revenue from the banking, financial services and insurance (BFSI) segment fell 5.4%.

During the first quarter, revenue from manufacturing and technology rose 8.6% and 8% year-on-year, respectively.

"Our results this quarter reflect the uncertainty in the global economy and the IT sector. We are confident that we have the right strategy and the right team to overcome this temporary setback and deliver long-term value for our customers and shareholders," says CP Gurnani, managing director and chief executive officer, Tech Mahindra.

Voluntary attrition during the quarter further fell to 13% in the first quarter, compared with 15% in the preceding March quarter and 22% in the last year's quarter.

"This quarter was a challenging one for us as revenue growth faced strong headwinds and that had an impact on profitability. We have taken swift and decisive actions to address these issues and improve our execution," says Rohit Anand, chief financial officer, Tech Mahindra.

In terms of geography, revenue from the Americas contributed over 50% whereas Europe accounted for 25%.

The company has cash and cash equivalent at ₹7,701 crore as of June 2023.

Shares of the IT major fell nearly 1% to ₹1,144 apiece on the BSE ahead of the earnings announcement.

Last week, Infosys recorded lower-than-expected earnings with its net profit growing 10.9% to ₹5,945 crore in the quarter ending June 30, 2023, as compared to ₹5,362 crore in the year-ago period. India’s second-largest IT services company sharply trimmed its FY24 revenue guidance to 1.0%-3.5% from 4-7% earlier, and operating margin guidance retained at 20%-22%.

HCLTech retained FY24 revenue guidance at 6-8% in constant currency. In its guidance for the quarter ending September 30, 2023, Wipro expects revenue from the IT services business segment to be in the range of $2,722 million to $2,805 million. "This translates to sequential guidance of -2.0% to +1.0% in constant currency terms."