Tech Mahindra CFO Explains Q1 Margin Miss
Tech Mahindra shares fell nearly 6 per cent to Rs 2,026.55 on Friday in the opening trade as the company's net profit in the first quarter was hit by lower-than-expected margin. The IT major reported 300 basis point sequential decline in its ebitda margin at 18.2 per cent against expectation (NDTV analyst poll) of 19.6 per cent. (How tech Mahindra fared in June quarter)
Tech Mahindra's utilisation in the quarter also fell to 72 per cent in the reporting period as against 75 per cent last quarter.
Milind Kulkarni, chief financial officer at Tech Mahindra spoke to NDTV and explained the margin miss. (Watch) Here is what he spoke on different operational parameters:
On Margin Decline
There were some few one-time expenses in this quarter. One was the H1B visa cost which took about 100 basis point of the margin (about $9 million), second was of course currency, rupee appreciation cost us about 50 basis points.
BT (British Telecom) amortisation cost us about 30 basis points. Some of the transitions and new projects cost us about 80 basis points.
On Lower Utilisation
We recruited in anticipation of growth, our utilisation numbers are about 72 per cent in the first quarter as against our historical average of 75-76 per cent.
If you look at four quarters we have a volume growth of about 18 per cent, we want to be in a scenario where we are able to cater to growth and look for people when there are opportunities.
On Revenue Growth
Pricing has been reasonably stable in the quarter. 3.6 per cent growth, (top-line) that we have seen in this quarter is driven by the volume. If we remove the impact of BT amortisation then the growth has been 4 per cent sequentially. We have not really seen any growth in our India business.
On Inorganic Growth
I don't think we are going to do acquisition just to meet the $5 billion target. If there is something at good value then we will acquire it.
Tech Mahindra shares closed1.08 per cent lower at Rs 2,127.15 on Friday compared to 1.45 per cent fall in the IT-sub index.
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