Release Date: October 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tech Mahindra Ltd (BOM:532755, Financial) reported a year-over-year growth in several key verticals, including BFSI (4.5%), healthcare and life sciences (4.5%), and retail (4.7%).
- The company achieved a new deal win TCV of $603 million for the quarter, indicating strong deal momentum across key markets.
- Tech Mahindra Ltd (BOM:532755) posted an EBIT margin of 9.6% for the quarter, with a sequential expansion of 110 basis points, driven by cost savings and currency tailwinds.
- The company announced several strategic partnerships, including collaborations with Microsoft and Google Cloud, enhancing its service portfolio and client value.
- Tech Mahindra Ltd (BOM:532755) received multiple awards and recognitions, such as the 2024 Supplier Excellence Award from Navistar and the Diamond Supplier Award from Bombardier, highlighting its industry leadership and commitment to sustainability.
Negative Points
- The manufacturing segment experienced a decline of 4% due to softness in the auto sector, impacting overall growth.
- Despite improvements, the communication vertical showed a year-over-year decline of 1.7%, indicating ongoing challenges in this sector.
- The company faces significant budget pressures from top telecom clients, particularly in the US, affecting revenue from these accounts.
- Tech Mahindra Ltd (BOM:532755) is in a turnaround phase, with the CEO acknowledging potential volatility in the current year.
- The offshore headcount mix increased, but the corresponding revenue growth did not fully reflect this shift, suggesting potential inefficiencies or underutilization.
Q & A Highlights
Q: How much of the 150 basis points investment for Project Fortius has been utilized in the first half, and what are the expectations for the second half?
A: Rohit Anand, CFO, explained that the investment is being accelerated into Q1 and Q2, with the second half expected to be slightly heavier. The focus is on setting the right platform for FY27 goals, balancing short-term metrics with long-term investments.
Q: What is the outlook on furloughs and the demand environment, and are there any plans for wage increases?
A: Mohit Joshi, CEO, noted that Q3 is typically weaker due to furloughs, with similar pressures expected this year. The demand environment remains largely unchanged, with some softness in manufacturing, particularly in the auto sector. Wage increases will be discussed post-Q2 results, considering both expectations and affordability.
Q: Are there early signs of progress towards the fiscal '27 targets, and how is Tech Mahindra positioning itself with clients?
A: Mohit Joshi highlighted progress in growth, margins, and organizational transformation. Key metrics include accelerated growth in top accounts, reduction in costs, and cultural transformation. The company is embedding gen AI into deals, with a significant portion of the workforce using AI tools.
Q: How is Tech Mahindra prioritizing large deal wins, and what is the approach to managing margins and contract risks?
A: Mohit Joshi emphasized the importance of large deals for growth, with investments in building a strong pipeline and improving conversion rates. The company prioritizes margins over large deals, avoiding risky assumptions about productivity gains.
Q: What is the strategy for scaling new BFSI accounts, and what types of contracts are being signed?
A: Mohit Joshi stated that Tech Mahindra focuses on differentiated capabilities in BFSI, such as insurance and payments, rather than being a cut-price player. The wins include a mix of large maintenance and development deals and preferred supplier agreements, allowing for expansion in various business areas.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
