Tech Mahindra's Q3 net profit falls over 60% to ₹510 crore

IT services and consulting firm, Tech Mahindra, on Wednesday, reported a net profit of ₹510 crore for the third quarter ended December 31. This marks a decline of 60.6% year-on-year (YoY) from ₹1,296.6 crore in the corresponding quarter of the previous fiscal year. 

The company's YoY net profit saw a decline of 41%, reaching ₹763 crore. Sequentially, the profit increased by a mere 3% from ₹494 crore in the previous September quarter. Consolidated revenue for Q3FY24 declined 5% YoY at ₹13,101 crore. The decline is attributed to a further slowdown in demand in key verticals, including hi-tech, telecom, and financial services. The company's EBIT margin or operating margin was at 5.4%, which is an improvement compared to the previous quarter's 4.7%. 

"The quarter was a mixed outcome, with growth in the Manufacturing and Healthcare segments but muted spending in areas like Communications, BFSI, and Hi-tech. While this dichotomy in the markets will take its own time to settle, we are focusing internally on realigning under the new structure and strengthening the foundations of our organization," said Mohit Joshi, Managing Director and Chief Executive Officer at Tech Mahindra. 

"We are encouraged by the robust cash conversions this year, and we hope to continue this rigor in other operational areas as well," added Rohit Anand, the company's chief financial officer. 

This is the first quarter since new CEO Mohit Joshi completely took over the reins of the company from former CEO CP Gurnani. To turnaround the business, Joshi restructured the organization and the leadership team, which came into effect on January 1, 2024. 

The company said, its current focus is to diversify more into other segments, including BFSI and healthcare and life sciences. At present, nearly 40% of the company's revenue comes from the Communications, media, and entertainment business. 

Indian IT services majors Tata Consultancy Services (TCS), Infosys, Wipro, and HCL Technologies have all announced their quarterly results ended December 31, 2023, in January, reporting muted growth and flat revenue. 

TCS reported a 2% YoY increase in net profit to ₹11,058 crore for the quarter ended December 31, 2023. Infosys recorded a 7.3% YoY decrease in net profit at ₹6,106 crore in the third quarter of FY24. Wipro reported a 12% YoY decrease in net profit at ₹2,694 crore for the quarter. This marks the fourth consecutive quarter of declining profits for the company. Consolidated revenue was ₹22,205 crore, down 4.4% YoY for the quarter. 

For these IT majors, the decline in revenue was mainly due to the ongoing weakness in the banking, financial services, and insurance (BFSI) vertical, as well as the company's significant exposure to consulting during a period of reduced discretionary spending. 

Meanwhile, HCL Technologies reported better-than-expected revenue of ₹28,446 crore for the quarter ended December 30. The company's consolidated net profit increased by 13.5% to ₹4,350 crore compared to ₹3,832 crore in the previous quarter (Q2FY24). Its consolidated revenue from operations also rose by 6.65% to ₹28,446 crore, as per the company's BSE filing.