Shares of Tech Mahindra jumped 13% on Friday after the IT company unveiled a three-year turnaround roadmap to increase revenue and double operating margin to 15% by the financial year 2026-27.
Tech Mahindra's operating margin stood at 7.4% in Q4 — lagging behind its bigger rivals — compared with 5.4% in the December quarter.
Tech Mahindra, which has underperformed its peers in the IT industry, also plans to shore up its top line growth.
In the ongoing fiscal, Tech Mahindra says it will be in the "turnaround" phase, focusing on anchoring the organisation, investing into key accounts, markets and service lines.
The IT firm also launched Project Fortius, which aims to cut employee costs and hire more freshers. It also aims to increase revenue from high-yield geographies and optimise costs. The company is also making early investments in 6G – telecom is a key vertical for the company.
Reacting to the development, shares of Tech Mahindra rose 13% to hit a high of ₹1,344.95 on the BSE, taking the IT firm's market cap to ₹1.29 lakh crore.
Net profit of Tech Mahindra fell 40.9% year-on-year to ₹661 crore for the quarter ended March, dragged down by tepid demand in key verticals like telecom. Revenue of the IT firm declined 6.2% to ₹12,871 crore during the fourth quarter.
“The volatility in spends is still very high given our exposure to telecom where visibility is still limited,” Tech Mahindra managing director and CEO Mohit Joshi says during the company’s Q4 earnings call.
Some elements of our business that we have in parts of the Middle East and Africa are still stressed, Joshi says.
“Q4 marks the low point in our year-on-year growth trajectory. We are confident that from Q1 onwards you will start to see an improvement on our year-on-year performance,” says Joshi. There, however, will be volatility between quarters, he adds.
For the full financial year, Tech Mahindra’s consolidated profit fell 51.2% to ₹2,358 crore while revenue slipped 2.4% ₹51,996 crore.
"As we step into FY'25, we look forward to improvement in clients spending, which fuels our optimism for a better revenue performance ahead. Our unique ability to enable customers with transformative scale at unparalleled speed, differentiates us from competitors. FY'24 posed its fair share of challenges for the IT services sector; yet, amidst the global economic uncertainties, we continue to observe a notable push towards digital adoption," says Mohit Joshi, MD & CEO, Tech Mahindra.
The IT firm’s total headcount dropped to 145,455 in Q4.
"With another quarter of robust cash generation, we have reported improvement in deal wins and operating margins in Q4FY'24, which has enabled consistent dividend distribution. We are confident that our actions will lead to steady earnings growth in the coming years. We will continue to focus on operational excellence and cost savings to deliver superior shareholder returns," says Rohit Anand, chief financial officer, Tech Mahindra.
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