Tech Mahindra Q3 results: Net profit drops 61% to ₹510 crore

Net profit of software services firm Tech Mahindra fell 60.6% to ₹510 crore for the quarter ended December 31, 2023, dragged down by muted demand in banking, financial services and insurance (BFSI), communications and hi-tech segments.

Consolidated revenue from operations declined 5% year-on-year to ₹13,101 crore during the third quarter compared with ₹13,734 in the year-ago period. The IT firm's operating margin stood at 5.4%.

The software major signed new deals worth $381 million in the third quarter, much lower than $640 million in the previous quarter, and $795 million in Q3 FY23.

"The quarter was a mixed outcome, with growth in the Manufacturing and Healthcare segments but muted spending in areas like Communications, BFSI, and Hi-tech. While this dichotomy in the markets will take its own time to settle, we are focusing internally on realigning under the new structure and strengthening the foundations of our organisation," says Mohit Joshi, managing director and chief executive officer, Tech Mahindra.

In terms of segments, the communications and media vertical, the largest revenue generator for Tech Mahindra, saw a 13.4% year-on-year decline in revenue. BFSI witnessed a 7.8% drop in terms of revenue. Revenue from the manufacturing vertical increased 8.7% in Q3.

"This year has given us the opportunity to step back and review our portfolio. We are confident that these actions will help us correct our course and deliver value in the long term. We are encouraged by the robust cash conversions this year, and we hope to continue this rigor in other operational areas as well," says Rohit Anand, chief financial officer, Tech Mahindra.

51.9% of the IT company's revenue came from the Americas while 23.8% came from Europe.

The total headcount at 146,250 as of December 31, 2023, was down 6.9% year-on-year and 2.9% sequentially. The 12-month attrition rate was 10% in the last quarter as against 11% in the September quarter.

The total cash and cash equivalents stood at ₹7,012 crore as of December 31, 2023.

In an interview with Fortune India last year, Mahindra Group CEO Anish Shah said that Tech Mahindra needs to continue its expansion beyond telecom. "We need to look at a very strong deliver structure because we have got a margin gap versus our peers and that margin gap we have to find a way to close," he said.