Fifth largest software exporter Tech Mahindra today reported a 90 per cent jump in post-tax profit for the three months to March at Rs 897 crore on wider margins from an expanded revenue base, forex gains and lower tax payout.
While its total revenues grew to Rs 6,883 crore from Rs 6,116 crore a year ago, its pre-tax profit margin expanded to 17 per cent from 15.4 per cent, lifting the bottom-line for the reporting period.
For the full year ending March, the company's net income rose 18.7 per cent to Rs 3,118 crore, while revenue was up 17.1 per cent to Rs 26,494 crore.
Chief financial officer Milind Kulkarni explained that the profit margins were pulled down by two acquisitions done in 2014-15, and the turnaround in the acquired companies has helped it post good numbers in the reporting period.
Citing Comviva, which it had acquired in 2012 for Rs 260 crore and performed exceptionally good in the reporting period, chief executive and managing director CP Gurnani said Tech Mahindra has repeatedly shown its capacity to turn around businesses acquired at lower valuations.
The company is currently working to lift the performance of its US-based Lighthouse Communications acquired in 2014 for USD 240 million and shed 20 per cent of the business which was not profitable enough, Gurnani said.
Gurunani said it will take another four quarters for the company to turnaround, while Kulkarni said TechM's ultimate target is to take the profit margin from low-single digit to double-digits for this company.
This US company underwent an organisational restructuring exercise wherein Manish Vyas has been appointed as the chief executive of the business.
For the March quarter, TechM reported a forex gain of USD 9 million as against a loss of USD 1.5 million in the year ago period which helped lift up the bottom-line, Kulkarni said.
The provision for taxes also came down to Rs 157.1 crore from Rs 184.5 crore as the effective tax rate declined to 21 per cent, he said, adding it will go up to 23 per cent going forward.
Vice-chairman Vineet Nayyar said while the company holds
an optimistic outlook despite various uncertainties, if Britain exits the Euro zone, it can lead to a fall in the English currency which in turn can impact the company's business.
Similarly, there are worries about election-bound US as well, depending on who occupies the White House, he said.
Compared to the preceding quarter, the banking, financial services and insurance vertical grew by a healthy 8.7 per cent, while communications stood flat despite Comviva's good show. The enterprise segment grew 1.9 per cent.
Gurnani said after a difficult patch, things seem to stabilising in the communications sector which accounts for a sizeable chunk of revenue.
Total number of employees moved up to 1.05 lakh and the utilisation including trainees stood at 77 per cent and Kulkarni said the target is to increase the utilisation level by 1 percentage point in the next two quarters.
Admitting to the automation story, Kulkarni said the company shed nearly 2,000 employees through normal attrition process in 2015-16 and added that going ahead, it will hire fewer number of experienced hands to focus on hiring low-cost freshers.
The company, which was among the 11 entities chosen by RBI to start a payments bank, will not be pursuing the initiative any more as it has concerns surrounding profitability, Gurnani said.
The company announced an additional dividend of Rs 6 per share to celebrate a decade since it listed on the bourses, taking the total dividend payout to Rs 12 per share.
TechM counter today closed 0.55 per cent higher at Rs 479.25 on the BSE as against a 0.30 per cent surge in the benchmark.
