Tech Mahindra profit dips on staff, R&D costs

Profit in the three months ended 30 September fell to ₹1,285.4 crore from ₹1,340.9 crore in the previous year. Rupee revenue rose 21% to ₹13,129.5 crore from ₹10,881.3 crore during the period. Dollar revenue grew 11% to $1.63 billion from $1.47 billion. The software services firm reported an attrition rate of 20% in the quarter, which was noticeably lower than its peers in the Indian IT sector that’s grappling with attrition rates of 21-25%.

A 27% jump in expenses hit Tech Mahindra’s net profit in the quarter. This led to an 11% fall in Ebit (earnings before interest and taxes) to ₹1,468 crore. Ebit margin too, fell 3.8 percentage points to 11.4% in the quarter.

CP Gurnani, managing director and chief executive, Tech Mahindra, said at a post-earnings conference call that there are slowdown markers in the global market. “For instance, large appliance vendors in Europe have seen a slowdown in net sales over the past two months due to slowing consumer spending. Factors like these will hit some deals in the coming quarters, but for now, the deal pipeline remains strong,” he said.

Tech Mahindra signed $716 million worth of net new deals in the quarter, lower than $750 million a year earlier.

The company added four new clients in the $10 million-plus category and three in $20 million-plus, but failed to sign any $50 million-plus deal during the September quarter.

North America contributed the bulk of total revenue, with a share of 50.8%, followed by Europe at 24.5%, and the rest of the world at 24.7%.

In an interview, Gurnani said while India contributes about 5% of revenues, local demand from the advent of 5G services, digital transformation and government projects remain robust at present.