Tech Mahindra, an influential player in the Indian IT services sector, reported surprisingly strong revenue growth for the quarter ending September. The company’s revenue increased by 3.49%, reaching 133.13 billion rupees (approximately $1.58 billion), surpassing analysts’ expectations of 131.9 billion rupees. This growth can be attributed primarily to robust performance in non-American markets, particularly Europe, alongside substantial gains in the Banking, Financial Services, and Insurance (BFSI) sectors. These positive figures line up with a global trend where IT service firms are increasingly depending on foreign markets to offset sluggish growth in domestic arenas.
Despite these encouraging figures, Tech Mahindra faces headwinds, particularly in its communications segment, which provides a significant portion of its revenue. The telecom sector has continued to exhibit signs of distress, reflecting broader economic conditions characterized by higher borrowing costs and geopolitical uncertainties. As clients tighten their budgets and limit discretionary technology spending, the challenges become apparent. CEO Mohit Joshi noted that telecom clients were increasingly focused on cost-saving measures, which further complicates the firm’s revenue outlook in that domain. The specific client-related pressures within the U.S. market indicate a need for vigilance and sustained adaptability.
On a more positive note, Tech Mahindra’s BFSI segment recorded a 4.5% increase in revenue, showcasing the firm’s ability to capitalize on growth opportunities in areas essential for digital transformation. Additionally, the Hi-Tech and Media segment reported a moderate gain of 2.4%, complemented by growth in European markets, which rose by 4.1%. Notably, the Rest of World sector demonstrated a remarkable growth rate of 9.7%, emphasizing the importance of diversification in Tech Mahindra’s strategy.
To navigate current challenges, Tech Mahindra has implemented a three-year turnaround strategy, primarily aimed at enhancing revenue while targeting a doubling of its operating margin to 15% by fiscal 2027. Joshi stated that these initial results indicate a budding resurgence, although volatility in the telecom and BFSI segments is expected to persist.
While the company’s net profit surged dramatically by 153% year-over-year, reaching 12.5 billion rupees ($149 million), this increase was substantially bolstered by one-time gains from asset sales. The new order bookings saw a slight decline from $640 million to $603 million—a worrying trend that may necessitate further strategic reassessment.
Analyst Gaurav Parab observed that the outlook, while still cautious, exhibits signs of a positive trend, attributing it to Joshi’s renewed strategic initiatives regarding delivery restructuring and account management. Although significant improvements are anticipated to materialize over time, the current results indicate that Tech Mahindra is on the right path to achieving a resilient turnaround.
While the company’s performance highlights some resilience and strategic foresight, it remains essential for Tech Mahindra to adapt dynamically to evolving market conditions, ensuring sustained growth and profitability in the long term.