Share prices of Tech Mahindra Ltd, India’s fifth-largest IT firm, tanked as much as 16.9% on the NSE in the opening minutes of trade to hit an intraday low of Rs 356.65. This sharp fall in stock price came after the company announced results for Q4FY17 after market hours on Friday.
The IT major reported a 30.2% sequential drop in net profit at Rs 589.6 crore for the quarter ended 31st March 2017, down 32.6% on-year basis as compared to Rs 876.1 crore. The company also announced its annual results for FY17, reporting a 6% drop in net profit at Rs 2,813 crore. Consolidated tax expenses surged 28 per cent to Rs. 232 crore, while the cost of services jumped 14.7 per cent.
The EBITDA for the quarter was Rs 899 crore, down 21.9 per cent year-on-year and 24.3 per cent sequentially. The margins stood at 12 per cent in the March quarter, from 16.7 percent a year earlier, following a $20 million hit from the company’s exit from a networking business contract, Milind Kulkarni, chief financial officer of the company, said.
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An appreciating rupee and a $15 million impact from “re-profiling” some of the company’s legacy business also contributed to the fall, Mr Kulkarni added. The impact of this “re-profiling” on the company’s finances will be visible for the next two to three quarters, Mr Kulkarni said.
Tech Mahindra saw project cancellations in its communication business amidst a restructuring of Lightbridge Communications Corporation (LCC), a US firm it had acquired in 2015. The IT major also renegotiated contracts with some of its clients to provide traditional IT services at cheaper rates while clients assured to spend more on automation and artificial intelligence driven services, the IT company said.
However, the company posted a near 10 per cent jump in consolidated total revenue, helped by growth in its European business. “The deal pipeline is stronger in emerging markets and digital transformation,” chief executive CP Gurnani said.
As of 10:20 am, the stock was trading down 12.41% at Rs 375.90 on the NSE.