Tech Mahindra’s net profit dips 40.9% to ₹661 crore in Q4

IT services major Tech Mahindra on Thursday, reported a 40.9% fall in net profit to ₹661 crore year-on-year (YoY) for the fourth quarter that ended March 31, compared to the corresponding period last year. This was driven by a continued slowdown in key verticals including telecom, communications, media and entertainment.

India's fifth-largest software company's revenue from operations in the fourth quarter of the fiscal fell 6.2% to ₹12,871.3 crore, compared to the year-ago period, below analysts’ estimate of ₹12,926 crore. On a quarter-over-quarter (QoQ) basis, revenue was down by 1.8%, but net profit was up by 29.5% during the period.

Tech Mahindra won deals worth $500 million during the quarter. The company plans to grow selectively in certain markets with a focus on the US and Europe. Together, both the US and Europe contributed to three-quarters of the company's topline during the quarter.

The company’s earnings before interest and taxes (EBIT) margin or operating margin came in at 7.4%, which is an improvement from the previous quarter’s 5.4%. Full-year FY24 revenue came in at ₹51,996 crore, decreasing by 2.4% YoY and net profit stood at ₹2,358 crore, down by 51.2% YoY.

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• Infosys Q4 Results: Profit jumps 30% YoY to ₹7,969 crore
• TCS Q4 results: Profit rises 9% to Rs 12,434 crore, revenue up 3.5%
• Wipro Q4 Results: Profit falls 8% YoY to ₹2,835 cr, revenue dips 4% YoY

The board recommended a final Dividend of ₹28 per equity share of the face value of ₹5 each for the financial year that ended March 31.

Mohit Joshi, CEO, Tech Mahindra said, "As we step into FY25, we look forward to improvement in clients' spending, which fuels our optimism for a better revenue performance ahead. Our unique ability to enable customers with transformative scale at unparalleled speed, differentiates us from competitors."

"FY24 posed its fair share of challenges for the IT services sector; yet, amidst the global economic uncertainties, we continue to observe a notable push towards digital adoption," he added.

The company further reported a net employee decline of 795 sequentially in Q4, in line with the larger industry-wide trend of slowdown in hiring amid macroeconomic challenges and demand uncertainties.

FY24 also marks the second-ever full-year decline in headcount for Tech Mahindra, which was down by 6,945. The IT firm had previously reported a full-year headcount drop in FY18. The total headcount for Q4 was 145,455. In the last quarter, Tech Mahindra's headcount went down by 4,354 employees. The attrition rate dropped to 10% in Q4 from 11% in Q3, continuing the trend of declining attrition rates since the start of fiscal year 2023.

D. K. Mudaraddi, Research Analyst, StoxBox opined that Tech Mahindra’s Q4FY24 results reflect the ongoing weak demand environment, leading companies to focus on improving margins through cost optimization. "The reduction in client spending has dented the company’s performance despite achieving healthy growth in deal signings during the quarter. Key monitorables going forward would include - FY25E sales growth & margin outlook, demand commentary related to 5G technology, ramp-up of new businesses, deal pipeline, client decision-making for the same, and strategy roadmap under the leadership of a newly appointed CEO," he said. 

The top three IT services companies, TCS, Infosys and Wipro, announced their quarterly results on April 12, 18, and 19 respectively. TCS reported a 9.14% YoY increase in consolidated net profit at ₹12,434 crore for the March quarter, compared to ₹11,392 crore in the same quarter the previous year. The company expressed optimism about AI, Cloud, Enterprise Solutions, Internet of Things (IoT), and Cyber Security, which it believes drove growth in the quarter.

Infosys posted a 30% YoY growth in its consolidated net profit at ₹7,969 crore for the quarter ending March 2024. This is compared to ₹6,128 crore in the same quarter the previous year. Revenue from operations in the fourth quarter stood at ₹37,923 crore, a 1% increase from ₹37,441 crore in the previous year's quarter.

Wipro’s net profit fell by 8% to ₹2,835 crore for the fiscal fourth quarter, compared to the same period last year when it stood at ₹3,074 crore for the Jan-March 2024 quarter. Wipro's consolidated revenue saw a decline of 4.2%, amounting to ₹22,208 crore, down from ₹23,190 crore in the same period last year.

Also, TCS, Infosys and Wipro too reported an annual headcount decline in FY24. TCS's full-year headcount was down by 13,249, Infosys’ headcount dropped by 25,994, while Wipro added 24,516 fewer employees in FY24.