IT services company Tech Mahindra on Thursday reported a 13.8% quarter-on-quarter (q-o-q) drop in consolidated profits to Rs 1,118 crore and a 0.1% fall in revenues to Rs 13,718 crore for the March quarter.
Ebitda decreased by 4.4% to Rs 2020.7 crore. Margins were down 80 basis points q-o-q, while revenue growth in constant currency terms was down 30 bps.
Tech Mahindra’s deal wins during the quarter were down to $592 million from $795 million in the third quarter of FY23, the lowest in the fiscal owing to the tougher environment. The company attributed a drop in margin of 60 bps to adverse foreign exchange impact, investments in technologies for the future and wage revisions. This was offset partially through a reduction in sub-contracting and cost reduction.
Managing director and CEO CP Gurnani said while there was no ramping down or deal cancellation, decision-making had slowed down. Retail, transport, logistics, communication, media and entertainment verticals had seen weakness. There was a steep 10% q-o-q drop in the retail vertical. They would shift focus to other verticals such as insurance and healthcare.
Headwinds would last a few quarters but a resurgence of IT services would happen soon and it could be two quarters away, Gurnani said.
Clients would evaluate and realise the benefit of outsourcing, he added. As interest rates come down in the US and it entered an election year the economy was expected to come back. The second half of FY24 could also see large deals returning with deal wins expected to be significantly higher than $ 3 billion in FY24, Gurnani said. The company would continue to invest and focus on new technologies, upskilling and leadership transition.
The drop in margins was temporary and an upward tick could be expected over the next few quarters, CFO, Rohit Anand, Tech Mahindra said.
Meanwhile, the company was looking at repurposing resources based on industry trends, working on new strategies such as co-creation with customers such as Google and working more closely with the Mahindra Group and monetization of the IP. The company was also looking at new geographies such as Japan and the Middle East to offset the slowdown in US and Europe.