Tech Mahindra Ltd., a global consulting service and systems integrator, in its Q3 earnings call discussed about demonstrating strong growth with net new deal wins reaching $745 million, though management acknowledged potential quarterly fluctuations. The company reported 300 basis points margin expansion over three quarters but expects a 1-1.5% margin impact from planned Q4 wage hikes. The company addressed that while facing some weakness in its European Pininfarina automotive business, it maintains strong partnerships with tech giants like SAP and hyperscalers.
Tech Mahindra showed mixed performance, with constant currency revenue growth of 1% exceeding expectations despite US Dollar revenue missing analyst estimates. The net profit showed a strong 89% year-over-year increase but declined 21.4% sequentially, falling below analyst estimates. Operational metrics improved significantly, with EBITDA reaching INR1,809 crore, up 57.8% year-over-year and margin expanding to 13.6%, while EBIT increased 5.4% quarter-over-quarter. Sector performance varied notably, with BFSI growing 8.3% while manufacturing declined 7.2% year-over-year. The company secured new deals worth $745 million, marking 95% year-over-year growth and reduced its workforce by 3,785 to 150,488 employees. The company remains optimistic about 2025 growth driven by stabilizing demand and AI opportunities.
Continue Reading: Discover the Vital Insights from Tech Mahindra Ltd.’s Earnings Call!
Financial/Operational Metrics:
- Revenue: INR13,286 crore, up 1% YoY.
- Net Profit: INR989 crore, up 89% YoY.
- Diluted EPS: INR11.08, up 92% YoY.
- Operating Profit: INR1,809 crore, up 58% YoY.
- Deal Wins: $745 million in new deal wins in Q3; $2.4 billion in LTM deal wins.
- Attrition: 11.2%.
Outlook:
- Long-Term Goals: Revenue mix optimization and a 15% EBIT margin target by FY27.
Analyst Crossfire:
- Deal Momentum & Growth Outlook, Telecom Vertical & Discretionary Spending (Sudheer Guntupalli – Kotak Mahindra AMC)? Highlighted steady large deal wins growing from $381M to $745M over five quarters, reflecting progress toward FY27 growth targets. Momentum varies by region; Asia Pacific is growing, Europe is stable, and North America faces discretionary spending challenges (Mohit Joshi – CEO).
- GenAI Differentiation & Transformation Progress (Rod Bourgeois – Deep Dive Equity Research): Emphasized proprietary small language models, sovereign LLMs, and partnerships with chip manufacturers. Innovations like AgentX frameworks and Neuro-symbolic AI enhance differentiation. Highlighted focus on large accounts, geographic portfolio balancing, and steady margin expansion under Project Fortius. Investments in tools, learning, and integration support sustainable growth (Mohit Joshi – CEO).
- Telecom Deal Trends & Other Verticals Growth (Ruchi Mukhija – ICICI Securities): Deals are largely consolidation and cost-focused, but the vertical remains active. Growth stems from global public sector ramp-ups, vertical-specific solutions, and new clients in BFSI and healthcare (Mohit Joshi – CEO, Rohit Anand – CFO).
- Renewals & Productivity Discussions, Margin Progression (Abhishek Kumar – JM Financial)? Renewals are stable, with healthy retention rates. Clients value Tech Mahindra’s domain expertise and delivery track record, contributing to renewal success. Margin expansion aligns with the initial plan, driven by savings and strategic investments. On track to achieve FY27 goals, with continuous focus on cost optimization (Rohit Anand – CFO, Mohit Joshi – CEO).
- Pipeline Strength & Deal Wins, Partnership Ecosystem Contribution (Gaurav Rateria – Morgan Stanley): Pipeline growth stems from ecosystem investments, partnerships, and improved win rates. Despite potential quarterly fluctuations, current visibility supports sustained deal wins. Significant growth potential with partners like SAP, Amazon, and Microsoft. Partner-driven high-margin businesses remain a strategic focus. (Mohit Joshi – CEO).
- Telecom & Vertical Diversification, Manufacturing Weakness & Auto Sector Trends (Vibhor Singhal – Nuvama Equities): Telecom leads in volume, but wins span chemicals, financial services, healthcare, and automotive. Vertical diversification balances growth and mitigates risks. Pininfarina-driven weakness affects European operations. However, focus on engineering and diversified exposure in the U.S. and Japan provides resilience (Mohit Joshi – CEO).
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