Tech Mahindra's Q4 net profit dips 26% to Rs 1,118 crore

Tech Mahindra reported a 25.8% dip in net profit for the fourth quarter ending March over the year, missing estimates to Rs 1,118 crore due to cutdown in client spending and higher employee costs.

North American inflation has impacted spending sentiment while Europe is also going through challenges, said CEO CP Gurnani adding that clients are looking at tightening budgets echoing the sentiments of other IT peers Tata Consultancy Services, Infosys and HCLTech.

The company announced a final dividend of Rs 32 per equity share of Rs 5.


Revenue for the quarter grew 13.2% year-on-year to Rs 13,718 crore, in line with estimates. On a sequential basis, profit was down 13.8% while revenue was down 0.1%. According to an ET poll of analysts, YoY revenue growth was expected to grow 14% YoY while profit was expected to dip 13.6%.

“Some of our clients are looking at tightening the budgets or slowing down on their decision cycle for the discretionary spend. But we are conscious that the investment phase will come back in terms of technology, and hence, we need to be ready,” Gurnani added.

For the full year, net profit was down 13.2% to Rs 4,832 crore compared to 25.7% growth reported in FY22. Revenue grew 19.4% to Rs 53,290 crore compared to 17.9% growth reported last year.

Gurnani added that the economy is expected to bounce back on track in two quarters. “The first two quarters (of the 2024 fiscal) may be slightly slow. But the last two quarters will definitely be good,” he added.

The company had called out weakness in Europe over the past two quarters due to high inflation and currency headwinds.

Large new deal wins for the quarter stood at $592 million compared to $795 million reported last quarter and $1.01 billion last year. The abrupt dip in the large deal order book was attributed to “delayed decision making”.

The operating margin for the Mahindra Group company stood at 11.2% in the fourth quarter compared to 12% clocked in the previous quarter and 13.2% in the year ago.

“The margin drop was predominantly driven through the wage inflation that we saw which was from the supply side activated to the year and then some normalisation impact of post-Covid travel energy in the coming back,” said Rohit Anand, chief financial officer, Tech Mahindra.

Tech Mahindra reported a subdued performance with margins below estimates, said Mitul Shah - head of research at Reliance Securities. “Subdued performance in technology and retail verticals and key geography of the Americas is a concern. We expect margin pressure built up over the near term amid slowdown in the America region,” said Shah.

Attrition for the quarter was down at 15% compared to 17% last quarter with the company indicating an improvement in employee retention measures. Net headcount was down 4,688 during the quarter, taking the total headcount to 152,400. For the full year net headcount grew by just 1,227.

Retail, transport and logistics vertical reported a 10% dip over the quarter while banking and financial services remained flat for the same period. Communication, media and entertainment also remained flat over the quarter. America remained flat over the quarter.