India’s fifth-largest software exporter also warned of currency and demand-related challenges in its key European market.
Revenue for the July-September quarter rose 20.7 percent year-on-year to Rs 13,129 crore. On a sequential basis, profits rose 13.6 percent while revenue rose 3.3 percent.
The company declared a special dividend of Rs 18 per share. “In Europe, I would be cautious. The European currency is not doing well. There are industries that are showing signs of stress. There is a slowdown in spending due to energy prices and inflation,” Tech. Mahindra Managing Director CP Gurnani said at a press briefing on Tuesday. “To date, our customers have not experienced a slowdown, but we would like to be cautious.”
Europe, which contributes 24.5 percent of the company’s revenue, reported a 3.5 percent decline in the top line due to currency headwinds. North America is its largest market, accounting for 50.8% of revenue.
Revenue growth was better than our estimates for Q2. However, as indicated by the company, (revenues) may be affected by the exit of some low margin portfolios,” ICICI Direct said in a note. “Total contract value of net new deals Stable as this is the seventh consecutive quarter of net new wins in excess of $700 million will provide future earnings visibility.”
Tech Mahindra reported an order book of net new deals worth $716 million for the quarter, compared to $802 million in the previous quarter.
Its management said the deal wins were led by acquisitions reported over the past few years, adding that 5G and digital customer relationship management (CRM) solutions in North America are leading the demand pipeline.
During the second quarter,
(), and registered record deal wins, improved pricing, lower employee costs and increased margins.
Tech Mahindra’s decline for the quarter stood at 19.6% compared to 22% in the previous quarter. The company has signaled improvements in employee retention measures.
On the issue of moonlighting, Gurnani maintained his stance on being open to dual employment under local laws in the geography even as the company maintains a zero-tolerance policy on any moonlighting issue.
“As a CEO, I’m saying that I’m happy if someone is productive, complying with all brand guidance or values, guidance, customer relationship guidance, and someone wants to do something else. I All I’m saying is, take permission and let us know what you’re working on,” he said.
During the quarter, the company increased annual wages for India-based employees in the range of 6-10%. The increase was higher for overseas employees – those working at overseas client sites – due to inflation adjustments.
On a year-on-year basis, the wage hike impacted the quarterly operating margin by 110 basis points (bps), which stood at 11.4 percent in the three-month period just ended, compared to 15.2 percent a year ago. was and 11.% in the first quarter of the financial year.
A basis point is one-hundredth of a percentage point. During the first quarter, the company said it aspires to reach a 14% margin in the near term.
Tech Mahindra Chief Financial Officer Rohit Anand said during the briefing, “The margin levers that have worked for us are pricing, operational efficiency, utilization improvement, offshoring, and various other internal initiatives while improving automation. It is also being worked on.” “We are also looking at right-sizing, shutting down operations that are not giving us any margin.”
Headcount increased by 5,877 to 163,912. The company said it will remain “motivated” on the 10,000 hiring target set for freshers for the fiscal year.