Tech Mahindra Q1 FY23 Research Tear Sheet

Business Overview- Tech Mahindra is an Indian multinational company. It mainly deals with information technology consulting and business process outsourcing. It was incorporated in the year 1986. The founder is Anand Mahindra. The company has its headquarters in Pune, Maharashtra India. The organization is worth USD 6 billion with 158,000+ professionals across 90 countries helping 1262 global customers, including Fortune 500 companies. 

Services- The services provided are Infrastructure & Cloud Service, Network Services, Integrated Engineering Solution, SAP, Data Analytics, Customer Experience, Experience Design Services, Testing Service, Performance Engineering, Oracle, Artificial Intelligence, Digital Supply chain, Business Process Services, Business Excellence Services, Telecom product engineering, Enterprise of future, Cyber security, Intelligent Automation.

Industry Served – Tech Mahindra has been successful in framing the future of different industries through innovation and technological improvement. Major industries that Tech Mahindra has so far served include communications, banking financial services, Energy & Utility, Media & Entertainment, Healthcare LifeScience, Hi-Tech, Professional Services, Manufacturing, Retail & Consumer, Travel, Transportation, Hospitality & Logistics, Oil& Gas. Let’s discuss on this vertical performance. Communications, Media & Entertainment constitutes 40.4% of total revenue. It increased 1.0% Q-O-Q and 19.1% Y-O-Y. Banking, Financial Services & Insurance constitutes 16.7% of total revenue. It decreased 2.9% Q-O-Q and  increased 20.0% Y-O-Y. The manufacturing sector constitutes 15.3% of total revenue. It increased 3.9% Q-O-Q and  8.9% Y-O-Y. Technology constitutes 9.7% of revenue, it increased 6.4% Q-O-Q and 30.3% Y-O-Y. Retail, Transport & Logistics constitutes 7.9% of total revenue. It increased 5% Q-O-Q and 21.2% Y-O-Y. Others constitute 10% of total revenue. It increased 0.2% Q-O-Q and 12.1% Y-O-Y.

Financial Snapshots-Revenue  increased by 4.9% Q-O-Q and was up 24.6% Y-O-Y to ₹ 12,708 crores. EBITDA declined 10.0% Q-O-Q and grew 0.2% Y-O-Y to ₹ 1,880 crores. Consolidated PAT declined by 24.8% Q-O-Q and 16.4% Y-O-Y to ₹ 1,132crores. The total headcount increased by 6,862 Q-O-Q and stood at 158,035. Cash Flow went down by 35% Y-O-Y and Free Cash Flow to PAT% went down by 44% Y-O-Y.

Geographical Revenue Analysis- America constitutes 49.6% of Total revenue. It increased 4.4% Q-O-Q and 25.6% Y-O-Y. Europe constitutes 25.5% of total revenue. It decreased  1.9% Q –O-Q and increased 10.7% Y-O-Y.  Rest of the World constitutes 24.9% of total revenue. It decreased 0.4% Q-O-Q and 12% Y-O-Y.

SWOT Analysis

Strength- Tech Mahindra has a diverse customer base. It offers IT Services to different industries which include telecom, banking, manufacturing and financial services. The company has a huge workforce of over 40,000 employees working over 30 countries.

Weakness- Majority of the revenue comes from Europe and US. Economic change can greatly hamper this revenue generation.

Opportunity -There is a great opportunity of cloud based business in the coming years. Tech Mahindra has developed acloud-based service and is expected to benefit from the increasing demand. Big DATA is another promising area for Tech Mahindra.  Big Data turns huge amount of data into insightful information.

Threat- There is huge competition in the IT Industry. There are major players like TCS, Infosys, Wipro, HCL and IBM etc. High rate of attrition due to lucrative package from competitors. Satyam related litigation has created a negative impact on the company.

Industry Analysis

The Indian IT and consulting industry is expected to reach US$ 100 billion by 2025. The companies are constantly investing internationally to expand global footprint and enhance their global delivery centres. It is also expected that since there is a huge demand for AI the market is expected to reach US$ 7 billion by 2030.

IT Industry is the backbone of the Indian Economy. Today we cannot think of any industry without IT. It has helped to grab the international market and this would improve the socio-economic status of Indians. To develop this IT sector the government has taken several measures. It has set up Software Technology Parks (STP), Export Oriented Units (EOU), Special Economic Zones (SEZ) and foreign direct investment (FDI).Though COVID-19 has impacted the economy as a whole but IT industry introduced the concept of digitization which helps to expand the demand in the digital economy. It successfully integrated  fifth-generation (5G) communication technology, artificial intelligence, Big Data analytics, cloud computing and the Internet of Things (IoT).

If we analyse the IT industry we can see Opportunity-wise, the IT sector is growing. But on the other hand there is a huge shortage of talented employees. The employees have multiple job opportunities. In Q1Tech Mahindra reported an attrition rate of 22%. Due to high attrition rates, the company’s income and expenses have suffered.

Key Developments

Partnership & Alliance- Tech Mahindra has entered into a partnership with Microsoft to build Sen Tindra, a cloud-based virtual security operations center  to develop Microsoft Sentinel. It offers single monitoring pane with all security components integrated which covers the entire lifecycle of the migration and transformation. The company has also entered in a collaboration with Keysight Technologies to certify 5G equipment in its 5G O-RAN test lab facility in New Jersey. It has entered in a collaboration with Pegasystems driving innovative industry solutions to accelerate the digital transformation of customers. It has also entered in a partnership with Amesto Aces AS, to provide trained & certified Salesforce resources and deep industry expertise to its customers across Europe. Tech Mahindra has entered in a partnership to launch with Anritsu, to launch an IoT experience lab.

Business Developments- The R&D division of Tech Mahindra has launched   ‘Meta Village’, a digital twin of Pargaon in Maharashtra to develop learning on the Roblox platform. Tech Mahindra launched  a suite of AI offerings called AmplifAI to democratize & scale the deployment of AI in a responsible manner. It has also inaugurated a 5G Innovation centre in Bellevue, WA to help customers co- create and co-innovate 5G-powered solutions. 

Achievements- Tech Mahindra awarded  by CEO Forum India at the 2nd Raymond CEO Forum Awards Night 2022 as an Outstanding Business Leader. It has been recognized by Marksmen Daily in association with India Today  as one of the preferred workplaces. ET Edge awarded Tech Mahindra for being the most Sustainable Organizations 2022. Dun & Bradstreet recognized Tech Mahindra for being the top performer in the ESG. Businessworld India awarded Tech Mahindra for being the most sustainable company for 2022.

ESG Initiatives- Tech Mahindra has reduced Energy Consumption by 7.6%. It has reduced emissions by 10.09%. It has increased Renewable Energy to 22.93%. Tech Mahindra  has opened a satellite Transgender Centre for beauty and wellness in Damana, Bhubaneswar. It even helped the economically challenged students to study in SMART Academy, for Healthcare, Pune.