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ICICI Securities Report
Tech Mahindra Ltd. reported a weak set of numbers on all fronts. Revenue at $1,061 million was down 4% QoQ (our estimate: -2.3%, consensus: -1.2%) due to sharp decline of 9.4% QoQ USD in communications (38% of revenue) and 3.2% QoQ USD decline in banking, financial services (16.1% of revenue).
Tech Mahindra's Ebit margin also contracted by a sharp 440 basis points QoQ to 6.8% due to drop in revenue, wage hikes, one-time provision related to client bankruptcy, and seasonal weakness in Comviva business.
Leading demand indicators were also muted:
orderbook at $359 million (-39.4% QoQ and -55.2% YoY) and
headcount down by 2.7% QoQ (-6.2% YoY).
Management expects gradual recovery in the communications vertical, which is being impacted by discretionary and 5G spend cuts.
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