Fifth largest software exporter Tech Mahindra today reported a 6.57 per cent rise in net profit in the three months ended June at Rs 798.6 crore, primarily aided by growth in non-core income. The Mahindra group company’s revenue from services grew 5.99 per cent to Rs 7,336 crore, while the other income grew 67 per cent to Rs 410 crore. The other income growth was on the back of a USD 20-million gains on its hedges and USD 9 million benefit from sale of an excess land parcel in Pune, chief financial officer Milind Kulkarni told reporters. Managing director and CEO C P Gurnani, who is the highest paid CEO in the country with over Rs 150 crore in total payouts, including Esops, said the company has started moving on a path of improvement in profit and revenue through work on operational metrics, getting out of “blue collared network business” and reskilling its workforce.
The company, which made headlines after a fired employee went public with his conversation with the HR, saw a reduction in its headcount by 1,713 in the three months to June to 1.15 lakh, which includes a reduction of 3,407 software professionals and addition of 1,908 BPO hands. Gurnani said the acquisition of US-based IT services company HCI Group, which got completed on May 4, helped add over 700 employees to the total strength. Declining to give a guidance on its hiring plans, Gurnani said, “I can only tell you it is a continuous exercise. Ultimately, optimisation of the workforce, hiring and reskilling is an integral part of the business.” TechM will be hiring 2,000 engineers in the US, which is its largest market, over the next few months. Commenting on the concerns on the US under President Doland Trump, TechM vice-chairman Vineet Nayyar said the new administration has “mercifully” created so much problems of its own that arrival of cheaper engineers is under the radar for now.
The company saw its overall attrition at 17 per cent during the quarter. Utilisation also remained stable at 77 per cent despite the reduction in the workforce, but CFO Kulkarni said it will improve over the next few quarters. The company has decided to defer wage hikes to the second quarter to the ones with up to six years experience and do it selectively for employees with over six years of experience from January 1, Gurnani said. Kulkarni said this move will impact the operating margins by 0.40 per cent in the second quarter. In the quarter under review, it reported a 0.70 per cent increase in operating margin at 12.7 per cent, largely on the back of a 120 bps benefit coming in from an increase in operating efficiencies and a reduction in losses from its acquired British firm LCC.
The 60 bps appreciation in the rupee, H1B visa costs (0.50 per cent) and mobility business (0.60 per cent) were the headwinds on the margin front, Kulkarni added. From a geographical spread perspective, revenues from the Americas and Europe grew, while there was a 6.6 per cent decline in the rest of the world. On the sectoral front, revenue from the communications vertical was down 1.9 per cent which was attributed to seasonal weakness. Digital revenue growth is outpacing the headline and grew to 20 per cent of the overall pie, Gurnani said, adding he expects it to grow to 40 per cent in 18 months. The company scrip closed 1.35 per cent up at Rs 385.25 on the BSE whose benchmark Sensex rallied 0.63 per cent to close at a new lifetime high of over 32,500 points.