Higher Forex Gains Lift Tech Mahindra’s Q1 Profit

Information technology services provider Tech Mahindra Ltd. reported a rise in profit for the April-June quarter on account of higher income from overseas investments.

Net profit went up 36 percent over the previous quarter to Rs 799 crore, according to a stock exchange filing. Analysts estimates tracked by Bloomberg had pegged profit to rise 2.9 percent to Rs 605 crore.

Tech Mahindra clocked a foreign exchange gain of Rs 272.6 crore, 68.5 percent higher than the previous quarter. Other earnings from interest, dividend and miscellaneous income almost doubled to Rs 138 crore.

Revenue from operations fell 2.1 percent sequentially to Rs 7,336 crore, while revenue in dollar terms went up 0.6 percent to $1,138 million.

Operating profit went up 4.1 percent to Rs 935 crore quarter-on-quarter, while operating margin expanded 70 basis points to 12.7 percent.

“Our digital business is growing ahead of our expectations backed by solid execution, as we realign our focus from run side of the business opportunities to change and grow,” Managing Director and Chief Executive Officer CP Gurnani said in the exchange filing.

Other Highlights

• The two core businesses of Tech Mahindra - IT services and business process outsourcing (BPO) - saw revenues decline. IT services revenue fell 1.6 percent during the quarter to Rs 6,863 crore while BPO services revenue fell 9 percent to Rs 473 crore.
• The U.S. contributed 46.8 percent of Tech Mahindra's total revenue, higher than the 45.1 percent revenue share from the previous quarter. Europe's revenue share increased slightly by 20 basis points.
• Tech Mahindra had 864 clients at the end of June, of which 21 were added during the quarter. However, bulk of them were in the lower bracket of less than $1 million in deal size. None were added in the top bracket of over $50 million in deal size
• Attrition rate unchanged at 17 percent from the previous quarter, with a total headcount of 1.15 lakh employees.
• Tech Mahindra imrpoved its cash positions with Rs 6,016.4 crore cash equivalents on its books at the end of the quarter.

Shares of Tech Mahindra gained for the second day and closed 1.19 percent higher ahead of the announcement.