The next few quarters will be challenging for Mohit Joshi, MD and CEO designate at Tech Mahindra given the company has posted one of the worst quarterly results.
Joshi, former Infosys president, joined Tech Mahindra on June 20, this year. In the June quarter, not only has the company seen its total active clients decline to 1,255 from 1,297 in the preceding quarter, the total contract value (TCV) at $359 million was also down from the March quarter’s $592 million.
Apart from the top line and bottom line pressures amidst the macro-economic headwinds faced by IT companies, the company also saw the bankruptcy of one its clients that hurt its topline by about $6-7 million in Q1 FY24.
Analysts believe it will take a lot of effort to revive growth. HSBC Global Research in a report said, “Although we do believe that the new CEO could bring structural changes, any path to a recovery will likely be gradual at best. Unfortunately, TechM is highly exposed to the telecom sector, which is the most impacted across the industry. This imposes a further burden on a recovery.”
It added, “We believe that in the coming few quarters, the new CEO has to figure out a strategy to adjust the pyramid of the company (bring down the average age of the company’s staff) and to consider stripping out low-margin businesses but still grow the company, which makes the proposition really challenging, especially in the current tough demand environment.”
ICICI Securities in a report, said, “We believe it could take significant amount of time and effort for the new CEO to turn around the business, which is predicated on three things – his strategy; steps to improve TechM’s digital capability and higher acceptance of its offerings among its clients; and aligning the entire top management with his vision for TechM and managing attrition.
Pareekh Jain, founder, Pareekh consulting, said, Joshi needs to bring in sales transformation at Tech Mahindra. “He is right person to do that because he has the pedigree of non-telecom verticals. He can drive more business from the non-CME vertical. It will be tough to balance margins and new investment. Transformation and growth initiatives need investment. But when margins are down, new investment would further put pressure on margins.”
During the press conference post the quarterly earnings, CP Gurnani, MD and CEO, Tech Mahindra, said, “Our results this quarter reflect the uncertainty in the global economy and the IT sector. The numbers are not satisfactory on EBITDA (earnings before interest, taxes, depreciation and amortization) side.” He added, “This quarter was one of the toughest quarters I have seen in the last five years.”The company attributed the slowdown in revenue growth to communication, media and entertainment (CME) business that was down 9.4% quarter on quarter (QoQ) and banking and financial services businesses that was down by 3.2% sequentially.