Tech Mahindra Q3 net down 5.3 pc despite revenue jump as profit margins narrow

NewsDrum Desk
30 Jan 2023

Mumbai, Jan 30 (PTI) Fifth-largest IT services company Tech Mahindra on Monday reported a 5.3 per cent dip in the December quarter net profit to Rs 1,296.6 crore due to declining margins on higher workforce costs.

The company reported a nearly 20 per cent growth in total income to Rs 13,735 crore as against Rs 11,451 crore in the year-ago period.

It was a narrowing of the profit margins to 12 per cent from 14.8 per cent which impacted the bottom line the most.

Chief Financial Officer Rohit Anand attributed the margin impact to pressures on the supply side, wherein higher wages impacted profitability.

He also hinted that achieving the 14 per cent target for end of FY23 may be difficult, explaining that an increase in wages due to the overall industry scenario has hiked staff costs, there was an accounting impact due to recent acquisitions and large deals being a drag on profitability initially.

Like some of its peers, the company reported a decline of nearly 1,800 people to 1.57 lakh employees, which was attributed to a reduction in business process outsourcing services staff.

The Mahindra group company's managing director and chief executive C P Gurnani said decision-making on new deals is taking longer due to the volatile business environment which is impacting the discretionary spending by clients, especially ones in the business-to-consumer or retail segments.

The overall demand is strong but it is the decision-making which has slowed down due to the overall uncertainties in the operating environment.

Gurnani said that for the odd case, there have not been any deal cancellations. Clients are planning for the short term rather than for the longer term.

The MD said the company is reviewing its planning methodologies given the dynamic environment, and the leadership will be meeting once every month rather than on a quarterly basis going forward.

It reported the signing of USD 795 million in new deals for the quarter, which is at par with the recent trend.

The company's president for corporate development Vivek Agarwal said it will honour all the hiring commitments it has made, and future recruitment will be on a 'just in time' basis.

Anand said there are multiple levers which still exist for widening the profit margins and the company will apply the same.

He said the company, which reported a massive reduction in attrition to 17 per cent, aspires to be the best in the industry in this metric.

When asked about the reasons for the sharp decline in attrition, Agarwal said opening up of centres in smaller cities was among the reasons for it as staff felt more comfortable to be closer to their hometowns.

The company scrip closed 0.58 per cent up at Rs 1,036.15 a piece on the BSE, as against gains of 0.29 per cent on the benchmark. PTI AA MR

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