Tech Mahindra Q2 profit falls 4%; announces special dividend

Net profit of software services provider Tech Mahindra slipped 4% year-on-year to ₹1,285.4 crore in the second quarter of the financial year 2022-23 on higher expenses.

Revenue of the IT services firm rose 20% year-on-year to ₹13,129 crore compared with ₹10,881.30 crore in the corresponding quarter last year.

The company's board approved a special dividend of ₹18 per share.

Tech Mahindra's operating profit or earnings before interest, taxes, depreciation, and amortisation (EBITDA) fell 0.6% year-on-year to ₹1,984 crore. On a sequential basis, EBITDA rose 5.5%.

The software firm's attrition rate fell to 20% for the quarter from 22% reported in the quarter ended June 30, 2022.

Total headcount rose 3.4% quarter-on-quarter to 163,912 employees.

Employee cost increased 27.3% year-on-year and 5.3% quarter-on-quarter to ₹6,895 crore.

"We continue to focus on being resilient and agile to ensure long-term value for our people, customers, partners, and the society at large. While market conditions evolve and supply-side challenges continue, we will strengthen our differentiated offerings to help customers in their transformation journey through our integrated & new-age solutions," says CP Gurnani, managing director and chief executive officer, Tech Mahindra.

The company's net new deal wins for the quarter was $716 million, lower than $802 million a quarter ago.

At the end of the second quarter, the company's total number of active clients stood at 1,279. Over 50% of Tech Mahindra's revenue comes from the Americas. The top five clients contributed 19% of the total revenue during the quarter.

"We have taken several targeted measures to achieve operational efficiencies and ensure long term sustainable growth. While we continue to address the dynamic market conditions, we will remain focused on creating value for our stakeholders, through continued operational rigor, robust cash generation and prudent capital allocation. Additionally, we have also announced a special dividend of INR 18 per share, in line with our capital allocation policy," says Rohit Anand, chief financial officer, Tech Mahindra.

In October, IT services major Infosys recorded an 11% year-on-year rise in its net profit during the July-September quarter of FY23 at ₹6,021 crore, led by digital and cloud services. India's largest software services exporter Tata Consultancy Services (TCS) too reported 18% year-on-year growth in revenue at ₹55,309 crore for the quarter ended September. The IT bellwether's net profit crossed the ₹10,000 crore mark.