Tech Mahindra's Strategic Move Leads to 23% Profit Surge Despite Revenue Dip

Tech Mahindra, an IT services firm, reported a 23% increase in consolidated net profit to Rs 851 crore for June 2024's quarter, despite a revenue decline of 1.2% to Rs 13,005 crore. This growth is attributed to strategic restructuring under new CEO Mohit Joshi, cost reductions, and selective deal wins.

On Thursday, IT services firm Tech Mahindra declared a notable 23 per cent ascent in its consolidated net profit, reaching Rs 851 crore for the June 2024 quarter.

Although the firm experienced a 1.2 per cent revenue dip to Rs 13,005 crore, the profit surge is credited to a strategic restructuring initiated by its new managing director and CEO, Mohit Joshi.

Joshi assures a better performance in FY25 than in the past year, emphasizing on considerable cost reductions, including a 40 per cent reduction in interest expenses contributing to profit growth despite lower revenues.

However, the financial gains come with mixed news for employees, as wage hikes are deferred to the second half of the fiscal year, reflecting prudent financial management.

Rohit Anand, chief financial officer, highlighted that the operating profit margin widened by 1.90 per cent to 12 per cent, bolstered by service cost reductions.

Nevertheless, the margin is anticipated to decline by 1.5 per cent due to increased investments in staff upskilling and future-proofing measures.

The company's new deal wins amounted to USD 534 million, despite sector-wide uncertainties, underscoring the positive impact of the company's internal restructuring.

Interestingly, unlike its peers, Tech Mahindra does not count repeat business in new deals, nor does it aggressively pursue large ticket deals.

The communication vertical saw a 10 per cent revenue growth, though challenges persist due to global telecom sector headwinds.

Revenue growth in the manufacturing sector was the fastest, while the BFSI vertical remains volatile yet promising, particularly in North America.

The quarter also saw a staff increase of 2,165, primarily due to new hires in the business process outsourcing segment.

Meanwhile, Tech Mahindra's stock edged up by 0.28 per cent, closing at Rs 1,530.10 apiece on the BSE, slightly outperforming the benchmark.