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Business News/ Companies / Company-results/  Tech Mahindra Q3 profit falls 20% to Rs805 crore
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Tech Mahindra Q3 profit falls 20% to Rs805 crore

Net profit fell to `805 crore in the three months ended 31 December from `1,010 crore in the year-ago period

In dollar terms, revenue rose 16.8% to $924 million in the quarter under review from $900 million in the preceding quarter, and $791 million a year ago. Photo: Hemant Mishra/MintPremium
In dollar terms, revenue rose 16.8% to $924 million in the quarter under review from $900 million in the preceding quarter, and $791 million a year ago. Photo: Hemant Mishra/Mint

Mumbai: Tech Mahindra Ltd, India’s fifth largest software services firm, on Friday said net profit fell by as much as 20% in the three months to December on currency volatility and wage hikes. Revenue rose 17.4%.

Net profit declined to 805 crore in the fiscal third quarter from 1,010 crore a year ago. Revenue rose 17.4% to 5,752 crore from 4,899 crore a year ago. The merger of Mahindra Engineering Services added $10 million in the quarter, the firm said.

A Bloomberg survey of 35 analysts had estimated net profit at 798.7 crore, while a poll of 38 analysts estimated revenue at 5,719.5 crore.

“Despite currency volatility that will continue to impact our margins, we believe this is incidental to growth in business which has been broad-based across geographies and verticals in the quarter," said Vineet Nayyar, executive vice-chairman, Tech Mahindra. “We are particularly optimistic about Europe as the currency devaluation will make imports more competitive and ensure larger demand for the Indian information technology (IT) sector."

In dollar terms, revenue rose 16.8% to $924 million in the quarter under review from $900 million in the preceding three months, and $791 million a year ago.

On a sequential basis, net profit rose 11.9% to 805 crore, compared with 720 crore in the September quarter, while revenue rose 4.8% to 5,752 from 5,488 crore in the preceding three months.

Earnings before interest, taxes, depreciation and amortization (Ebitda) rose 5.7% to 1,160 crore in the December quarter.

“Our initiatives on digital is paying off, strengthening our market reach in digital enterprise solutions and Internet of things," said C.P. Gurnani, managing director and chief executive officer, Tech Mahindra. “Our deal pipeline is looking good, despite market demand shifting, and we will focus on growing our existing accounts as well as looking at acquisitions for capability and geography where necessary."

“Tech Mahindra announced its third-quarter earnings in line with expectations on sales and Ebit (operating profit) front, while net profit was marginally above," said Sarabjit Kour Nangra, vice-president, research, IT, at Angel Broking. “New clients added significantly to the growth, taking their contribution from 3% in September quarter to 5% in December quarter."

Tech Mahindra said the $240 million acquisition of Lightbridge Communications Corp. announced on 20 November is due to close by mid-February, while the acquisition of Geneva-based banking consulting and services firm SOFGEN Holdings Ltd announced on 9 January is due to close by end-February.

Tech Mahindra added 25 clients in the December quarter, taking its active client count to 674 in the three months to December from 649 clients in the preceding quarter. It reported 95% repeat business, while adding one $50 million client and two $20 million clients.

Growth was led by the Americas, which contributed 48.8% to total revenue, while Europe contributed 31.4% and rest of the world grew 19.8%.

Growth was led by the communication sector, which grew 50.9%, followed by manufacturing, which grew 19.7%; banking and financial services and insurance grew 9.8%; technology, media and entertainment grew 7.3%, and retail, transport and logistics grew 6.4%.

The firm added 2,700 employees in the December quarter, taking the company’s total headcount to 98,009. Attrition rose to 19% in the quarter, compared with 18% in the preceding three months and 15% in the year-ago period. The company attributed rising attrition to industry demand shifting to digital demand. Utilization rose to 78%, compared with 76% in the preceding quarter.

Its cash stood at 4,214 crore on 31 December.

The results were announced after market hours.

On Friday, shares of Tech Mahindra fell 0.83% to 2,878.30 on BSE, while the benchmark Sensex lost 1.68% to 29,182.95 points.

In the past one year, shares of Tech Mahindra have gained 66%, while the Sensex has gained 43.76% and the BSE IT Index has gained 18.41%.

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Published: 30 Jan 2015, 04:49 PM IST
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