Tech Mahindra revenue growth up 5% in Q1, profits grow 32% sequentially

Information technology services firm Tech Mahindra has reported a better than expected revenue and net profit for the first quarter of the financial year 2020-21. 

The Pune-based company reported less than 1% year-on-year growth in profits to Rs 956 crore, compared to Rs 949 crore. It recorded a 32% sequential growth in consolidated net profits to Rs 726 crore. 

Its income stood at Rs 9,106 crore for the June quarter of FY21, a 5.2% growth from the Rs 8,653 crore it reported for the same period last year.

"We are witnessing a wave of new-age technologies being adopted by the customers as businesses across the globe are actively pursuing digital transformation. We are well-positioned to capture such spends and our endeavour is to be back on the growth path amid increased signs of demand normalisation," CP Gurnani, managing director and CEO of Tech Mahindra said in a statement.

In Q4 of FY20, Tech Mahindra’s consolidated net profit saw a 29% decline, while full-year net profits were down 6.14% to Rs 4,033 crore from Rs 4,297 crore it had reported in the previous financial year. The company's revenue for Q4 last year, as well as the full-year income growth, stood at below 7%.

According to the company, it secured a total contract value of $290 million during the June FY21 quarter while the number of active clients grew by eight to 981. The company's margin rose by 10 basis points on a sequential basis.

"Despite demand uncertainty and volume reduction, we have been able to demonstrate operational resilience through cost optimisation. Cash conversion has been strong, while we aim to improve profitability margins as demand normalises," Manoj Bhat, CFO at Tech Mahindra said.

In constant currency terms, the company has seen a revenue decline of 6.3% quarter on quarter and 1.8% year on year basis. The company's free cash flow stood at $316.7 million for the quarter with the cumulative cash reserves rising to almost $1.4 billion at the end of June quarter.

Tech Mahindra was expected to perform better this quarter as it generates 40% revenue from telecom vertical, a sector that has seen a growth in consumption due to remote working globally.

Early this month, Tech Mahindra had launched a digital platform for the media and entertainment industry, branded as ‘blockchain-based Contracts and Rights Management System’ (bCRMS), which will help the production houses and content creators track revenue and royalty payments, manage rights, and address content piracy by leveraging IBM’s blockchain solution.