Result Analysis: Tech Mahindra Limited (CMP: Rs.1,036) Result Update: Q3FY23

Tech Mahindra is one of the leading provider of consulting-led integrated portfolio services to customers around the globe. It also provides comprehensive range of IT services, including IT enabled services, application development and maintenance, consulting and enterprise business solutions, extended engineering solutions and infrastructure management services to a diversified base of corporate customers in a wide range of industries including insurance, banking and financial services, manufacturing, telecommunications, transportation and engineering services.


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    Stock Details
    Market Cap. (Cr.) 100905
    Face Value 486.92
    Equity (Cr.) 5
    52 Wk. high/low 1575 / 944
    BSE Code 532755
    NSE Code TECHM 
    Book Value (Rs) 275.55
    Sector IT – Software


    Key Ratios
    Debt-equity: 0.11
    ROCE (%): 23.78
    ROE (%): 21.76
    EPS: 53.59
    P/BV: 3.8
    P/E: 19.33

    Result Highlights:

    • Tech Mahindra posted soft results in the December’22 quarter with Revenue increase of 4.6% QoQ to Rs.13,735 cr. and Net profits increase of 0.9% QoQ to Rs.1,297 cr.

    • EBIT of the company increased by over 10% QoQ to Rs.1,646 cr. and EBIT margin increased with 60 bps to 12% compared to previous quarter.

    • Among industries Retail, Technology and Communication segments’ revenue% have grown by 40bps, 20bps and 10bps respectively while BFSI and Manufacturing segment revenue % de-grew by 40bps and 30bps.

    • Across geographies, America and Europe revenue% declined by 110bps and 10bps in the quarter. While revenue% from Rest of the world showed growth of 120bps on QoQ basis.

    • Company Net New Deal wins stands at USD 0.8bn in the quarter vs USD 0.72bn in the September’ 22 quarter.

    • Attrition rate has dropped significantly by 208bps from 19.6% in September quarter’22 to 17.3% in this quarter. Company has reduced its total headcount by 6,844, now counts to 1,57,068.

    • The management of the company has shown concerns over the prevailing macro-economic environment as witnessing delayed decision makings from clients.

    • Company has guided to achieve exit EBIT of 14% by FY23.

    Financial  Performance:

    Shareholding Pattern:

    Particulars %
    Promoters & Promoter Group 35.19
    FIIs 28.97
    DIIs 23.94
    Public 11.19
    Others 0.71

    Management Commentary:

    • Commenting on the December quarter results, CP Gurnani, CEO and MD said, we are witnessing moderation in growth given the tough macro-economic environment. We will continue to work with our customers to pre-empt their technological requirements and identify new demand drivers, especially for digital services.

    • Rohit Anand, CFO said, our numbers reflect resilience as we continue to work on the expansion of operating margin. I am confident that our strategy of client centricity & agility combined with delivery led transformation will help us create value for our customers and stakeholders alike.


    Tech Mahindra has reported mixed performance in Q3FY23 with 4.6% growth in the revenue and 0.9% growth in the PAT on quarterly basis. America and Europe has shown decline in the revenue% due to the prevailing macro-headwind in these regions. Extending layoffs, delay in 5G capex and prevailing headwinds in Europe will impact the revenue growth of Tech Mahindra and could delay in achieving the forecasted EBIT guidance of FY23. For the nine months of FY23 company has reported the earnings of Rs.42.1 and we expect the company to close the FY23 at the eEPS of Rs.56.1. Based on the estimated earnings, Tech Mahindra is available at PEx of 18.5 at the current market price.


    Particulars (In Rs. Cr.) Q3FY23 Q2FY23 Q3FY22 QoQ% YoY% 9MFY23 9MFY22 FY22
    Revenue from Operations 13,735 13,130 11,451 4.6% 19.9% 39,572 32,530 44,646
    Other Income 247 290 223 -14.8% 10.8% 660 793 1,112
    Total Income 13,982 13,420 11,674 4.2% 19.8% 40,232 33,322 45,758
    Employee Benefit Expenses 7,055 6,895 5,660 2.3% 24.6% 20,500 16,238 22,286
    Employee benefit Expenses as % of Sales 51.4% 52.5% 49.4% -120 bps 190 bps 51.8% 49.9% 49.9%
    Subcontracting Expense 1,974 2,025 1,874 -2.5% 5.3% 6,064 5,051 6,957
    Depreciation & Amortisation Expense 498 492 362 1.3% 37.6% 1,467 1,036 1,520
    Other Expense 2,562 2,226 1,856 15.1% 38.0% 6,999 5,309 7,383
    EBIT 1,646 1,492 1,698 10.3% -3.1% 4,542 4,895 6,500
    EBIT Margin 12.0% 11.4% 14.8% 60 bps -280 bps 11.5% 15.0% 14.6%
    Profit After Tax (PAT) 1,297 1,285 1,369 0.9% -5.3% 3,714 4,060 5,566
    PATM (%) 9.4% 9.8% 12.0% -30 bps -250 bps 9.4% 12.5% 12.5%
    EPS (in Rs.) 14.7 14.58 15.58 0.8% -5.6% 42.11 46.23 63.32


    Segment Revenue (In Rs. Cr.) Q3FY23 Revenue% Q2FY23 QoQ% Q3FY22 YoY%
    IT 11800 85.9% 11,398 3.5% 10,001 18.0%
    BPO 1935 14.1% 1,731 11.8% 1,450 33.4%
    Total 13,735 100% 13,130  – 11,451


    Geography Revenue % Q3FY23 Q2FY23 Q3FY22 QoQ YoY
    America 49.7% 50.8% 48.9% -110 bps 80 bps
    Europe 24.4% 24.5% 25.5% -10 bps -110 bps
    Rest of the World 25.9% 24.7% 25.6% 120 bps 30 bps


    Segment Revenue % Q3FY23 Q2FY23 Q3FY22 QoQ YoY
    Communications, Media & Entertainment 39.80% 39.70% 40.90% 10 bps -110 bps
    Manufacturing 15.70% 16.00% 15.80% -30 bps -10 bps
    Technology 10.30% 10.10% 8.40% 20 bps 190 bps
    Banking, Financial Services & Insurance 15.90% 16.30% 15.40% -40 bps 50 bps
    Retail, Transport & Logistics 8.50% 8.10% 8.50% 40 bps
    Others 9.90% 9.80% 10.90% 10 bps -100 bps
    Source: Company website, EWL Research

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