Tech Mahindra Aims Double-Digit Organic Growth In Fy22; Wage Hikes Impacted Margins In Q1fy22

IT firm Tech Mahindra reported a 30.8 percent rise in its net profit for the first quarter of fiscal 2022 at Rs 1,353.2 crore as against Rs 1,081.4 crore in the quarter ended March 2021. The company’s rupee revenue in Q1FY22 grew 4.8 percent to Rs 10,197.6 crore from Rs 9,729.9 crore, QoQ. The dollar revenue was at $1,383.6 million, registering a growth of 4.1 percent from $1,329.6 million, QoQ. The company’s dollar revenue growth is at the highest level in the last six quarters. Deal wins also remain robust at USD 815 million. CP Gurnani, Managing Director and CEO, and Milind Kulkarni, CFO at Tech Mahindra, discussed the performance.

The company had guided for a double-digit growth for FY22. The company’s growth is more than 3 percent in the current quarter. Gurnani said, “We should be able to maintain that trajectory or do better than that growth rate for the next three quarters or more because clearly Tech Mahindra will continue to invest for the future, will continue to become better partner for our customers.”

What worked for the company this quarter was that Tech Mahindra as a company looked at large deals. That created order backlog and also created a little bit of predictability into the operations, said Gurnani.

In terms of margins, Kulkarni mentioned, “We did better in a seasonally weak quarter. We hope to maintain it or maybe improve it marginally.”

“There would be tailwinds coming from operating leverage, operational efficiency, there could be headwinds in terms of higher cost of the employee addition as well as retention but we are confident of maintaining the EBITDA margin,” Kulkarni stated.

“There have been two increases – one is increments and second is because of the COVID restrictions we had to employ higher number of onsite contractors. We have been able to manage – clearly recovered part of it through operational efficiencies. If you notice our utilisation has improved by about 60 basis points (bps) and an increased offshoring. Operating leverage coming because of higher growth. We expect those tailwinds to be there even in the coming quarters and we should be able to take care of these,” Kulkarni added.

Company’s capital allocation is focused towards cloud and artificial intelligence (AI). “All our acquisitions were on cloud and AI. We created a digital VPS, a customer experience management, human experience management, so that investment has also helped. 5G investments in software defined networks, cloud-based networks – all these investments speak for themselves,” Gurnani explained.

For the full interview, including the company’s attrition outlook, watch the accompanying video.

(Edited by : Dipika Ghosh; Abhishek Jha)

First Published:  IST

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