Tech Mahindra Q3 result review, Reliance Securities

Tech Mahindra Ltd. reported revenue of $1,668 million (up 2% QoQ/up 9% YoY), 1% higher than our estimates of $1,650 million. Sequential constant currency growth came in at 0.2%, versus our estimate of 0.5%.

The company won net new deals worth $795 million, compared to $716 million in Q2 FY23. Ebit margin came in at 12% (up 80 bps QoQ /down 284 bps YoY), versus our estimate of 11.7% due to better operating leverage, controlled hiring (net employee reduction) and lower sub-contracting expenses.

Sub-continent expenses/sales fell 100 bps QoQ to 14.4%. However, higher other expenses due to travelling cost and increasing overheads with rising office working nullified the benefit.

Other exp/sales grew 160 bps QoQ/250 bps YoY to 18.7%. Net income stood at Rs 12.9 billion (up 1% QoQ/ down 5% YoY), versus our estimate of Rs 13 billion, due to higher interest expense.

Tech Mahindra indicated despite current healthy deal wins, higher level of uncertainty and delay in decision making in U.S., UK, Germany and few other parts of Europe may impact execution over near to medium term. Bloomberg