Tech Mahindra: Toughest quarter in 5 years, says Tech Mahindra CEO as profit drops 40%

India’s fifth largest IT services company Tech Mahindra reported a rough first quarter (April-June) as net profit plunged due to a sharp narrowing of margins. The Mahindra group company had reported a net profit of Rs 1,131.6 crore in the same period last year. In the preceding quarter, the same stood at Rs 1,117.6 crore. The company’s revenues slid to Rs 13,159 crore in the reporting quarter.

Profit dips 40%
Tech Mahindra has reported a nearly 40% year-on-year (YoY) decrease in net profit in the three months ending in June

Toughest quarter in five years
Chief executive officer CP Gurnani said that the quarter was marked by large-scale slowdowns, particularly across communication clients. “This quarter is probably one of the toughest quarters I have seen in the last five years, but we believe that we will be able to bring back our growth trajectory,” Gurnani said. “There’s a speed breaker right now and it has influenced the industry. Deal conversions have been impacted. The numbers are not satisfactory on the EBITDA front. My belief is some of the challenges are temporary and we will bounce back over the next few quarters,” Gurnani said.
Earnings breakup
The communications, media, and entertainment (CME) vertical, which accounts for about 38% of its revenue, was down 8.2% from a year ago. BFSI revenue was down 3.2% sequentially and 5.4% on-year. Its Europe revenues are down 6.7% over the prior quarter, while US revenues are down 0.5% on-quarter. The Americas, Europe, and RoW (rest of world) all witnessed sequential declines in revenue. The number of active clients dropped by 42 sequentially.
CEO-designate and former Infosys president Mohit Joshi was part of the press conference to announce the June quarter results. Joshi will succeed CP Gurnani later this year.