Tech Mahindra Q4 Profit Slumps 41%, Outlines 3-Year Growth Plan
Apr 25, 2024 21:43
Tech Mahindra's Q4 net profit fell 41% to Rs 661 crore due to weak comms vertical, but CEO outlines a 3-year plan to boost revenue and margins.
New Delhi, Apr 25 (PTI) IT services company Tech Mahindra on Thursday reported a 41 per cent fall in its consolidated net profit for the March quarter to Rs 661 crore amid weakness in the communications vertical, even as its CEO outlined an ambitious three-year roadmap to accelerate revenue growth and lift margins.
The top brass acknowledged that the Q4 results marked a "low point" in the company's growth trajectory but exuded confidence that year-on-year performance improvement will become visible starting the first quarter.
Tech Mahindra CEO Mohit Joshi said the company hopes to come back to growth in H2 FY25. The company plans to onboard around 6,000 freshers this year.
The tech giant - which competes with the likes of TCS, Infosys, Wipro and HCL Technologies - also spelt out a three-year plan to shore up the company's revenue and margins.
Tech Mahindra's consolidated net profit plunged almost 41 per cent to Rs 661 crore for the quarter ended March 2024. For Q4 FY24, the revenue dropped by 6.2 per cent year-on-year to Rs 12,871 crore.
"We believe this year will be better than the previous one. In a world of heightened geopolitical turmoil, coupled with fast-evolving AI capabilities, organisations will either have to address and adapt or defend and insulate their businesses like never before," Joshi said during the Q4 earnings conference.
Clients will turn to technology partners like Tech Mahindra who can help them transform at speed and bring agility, resilience, and efficiency to their businesses, he emphasised.
"We are confident that from Q1 onwards you will start to see improvement in year-on-year performance...there will obviously be volatility between quarters because this is the year of turnaround so you should expect to see volatility...but beyond Q4 there will be year-on-year improvement and we expect to come back fully to growth by the second half of the year," he said.
Volatility in discretionary spending is "still very high", he said adding that visibility in telecom is limited.
"The confidence is there is a long-term trajectory of the company," he asserted.
For full FY24, the consolidated net profit tanked 51.2 per cent year-on-year to Rs 2,358 crore. The revenue stood at Rs 51,996 crore, a decline of 2.4 per cent over the previous fiscal.
The IT services company said the manufacturing segment performed extremely well, and added that management looks at it as a continued avenue of growth.
The total headcount at the end of Q4 FY24 stood at 1,45,455, down 795 from Q3 FY24.
Joshi said the company has been steadily adding fresh graduates, with a count of about 1,500 every quarter, and will onboard around 6,000 freshers this year.
"As we step into FY25, we look forward to improvement in clients' spending, which fuels our optimism for a better revenue performance ahead," he said.
He added that FY24 posed its fair share of challenges for the IT services sector.
"...yet, amid the global economic uncertainties, we continue to observe a notable push towards digital adoption," Joshi said.
During the analyst call post Q4 earnings, Joshi unveiled the contours of the roadmap and vision for the next three years.
"We are living in a new era of scale and speed. The way large enterprises approach technology has fundamentally changed," he said.
For the company, FY25 will be the turnaround phase wherein investing in accounts, key markets, and front-end integration of portfolio companies would be the main focus.
The following fiscal, FY26, would be one of stabilisation for the company where integration of portfolio companies shall be completed with a focus on cost savings.
Joshi said accelerating revenue growth and margin expansion would be in focus all through.
The board recommended a final dividend of Rs 28 per equity share (face value of Rs 5 each) for the financial year ended March 31, 2024.
"With another quarter of robust cash generation, we have reported improvement in deal wins and operating margins in Q4 FY24, which has enabled consistent dividend distribution. We are confident that our actions will lead to steady earnings growth in the coming years," Tech Mahindra Chief Financial Officer Rohit Anand said.
The company will continue to focus on operational excellence and cost savings to deliver superior shareholder returns, he added.
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