Tech Mahindra Q2 net up 26% YoY to Rs 1,339 cr, down slightly sequentially

Firm announces two acquisition in digital space

Tech Mahindra, a top-5 IT services provider, reported a strong set of numbers in the second quarter of FY22, as growth was driven by adoption of 5G, cloud and digital transformation.

The company reported net profit at Rs 1,339 crore up 25.8 per cent, but down 1.1 per cent sequentially. Profits were impacted by higher tax rates in other geographies. The revenue for the quarter grew 16.1 per cent year-on-year at Rs 10,881 crore. Revenue was up 6.7 per cent sequentially.

In dollar terms the company reported revenue growth of 6.4 per cent Q0Q at $1.47 billion, up 7.2 per cent in constant currency. The TCV for the quarter came in at $750 million. Of this, $455 million deals were signed in the communications, media and entertainment (CME) segment and $495 million came from enterprises. Operating margins for the quarter came in at 15.2 per cent.

“This is one of the best quarters in a decade for Tech Mahindra. We remain committed to deliver long-term sustainable and profitable growth for the company. We are seeing significant acceleration of growth led by 5G, and even our enterprise segment continues to grow at a good pace,” said C P Gurnani, MD & CEO, Tech Mahindra.

“The company reported healthy revenue growth in line with large cap peers. It has also shown healthy traction in the order book. The company’s margin resilience was also largely in line with its peers due to the effort mix ratio skewed towards offshore (200 bps swing in YoY basis). We would be revisiting our estimates and target price shortly,” said the first cot note from ICICI Direct Research.

The company also announced two acquisitions. It acquired California headquartered Lodestone, a digital engineering quality assurance provider for a consideration of $105 million of which $62 million will be upfront payment and the rest will be performance based payment. Lodestone reported revenue of $43.3 million for CY20.

Tech Mahindra also acquired London-based WMW, is a leading provider for Shopify platform for a consideration of GBP 9.4 million. The company reported revenue of GBP4.6 million for CY2020.

Vivek Agarwal, President – BFSI, HLS and Corporate Development, Tech Mahindra,said, “These acquisitions fit into Tech Mahindra’s strategy of building digital capabilities.  Lodestone is in line with our strategy to strengthen digital capabilities and

provide enhanced and comprehensive transformation services to our customers globally. This will bring significant synergies to complement our domain expertise and will help drive growth going forward.”

Like its peers, Tech Mahindra also saw its attrition touch 21 per cent for the quarter. It spiked from 17 per cent reported in Q1FY22. During the quarter the company added 14,930 associates, taking its total employee headcount to 141,193.