January 25, 2023
New Delhi, India
Tech Mahindra Q3
In a recent development, Tech Mahindra, one of India’s leading IT services firms, faced a significant setback in its third-quarter (Q3) financial performance. The company reported a staggering 61% year-on-year drop in consolidated net profit, plummeting to Rs 510 crore compared to Rs 1,297 crore in the same quarter the previous year. This marks the first quarter under the leadership of new CEO Mohit Joshi, who took over from former CEO CP Gurnani.
Segmental Challenges Impact Revenue:
The weak performance was primarily attributed to a 13.4% decline in the communications, media, and entertainment vertical – the largest revenue contributor for Tech Mahindra. The company’s overall revenue also witnessed a 5% dip, reaching Rs 13,101 crore. Operating margins declined sharply by 660 basis points to 5.4%, emphasizing the challenges faced by the firm in a competitive market.
Industry-wide Headwinds:
The broader IT industry in India has been grappling with uncertain demand due to clients cutting back on spending amid inflation and recession fears. Tech Mahindra’s results reflect this trend, particularly in segments like communications, banking, financial services, and hi-tech.
Stock Market Response:
Following the announcement, Tech Mahindra’s stock experienced a sharp decline of 6.09%, reaching a day low of Rs 1,322 compared to the previous close of Rs 1,407.75. The stock’s technical setup indicates a mixed trend, trading lower than the 5-day and 10-day simple moving averages but higher than the 20-day, 30-, 50-, 100-, 150-day, and 200-day SMAs. The 14-day relative strength index (RSI) stands at 54.54, reflecting a neutral position.
Also Read: DLF Reports Robust Q3 Performance with 26% YoY Profit Jump
CEO’s Perspective and Future Outlook:
CEO Mohit Joshi characterized the quarter as “mixed,” acknowledging growth in the manufacturing and healthcare segments. However, spending remained muted in critical areas such as communications, BFSI, and hi-tech. The new deal wins more than halved to $381 million from $795 million, further indicating the challenges in securing new business.
Valuation and Ownership:
Tech Mahindra’s stock currently holds a price-to-earnings (P/E) ratio of 45.86 and a price-to-book (P/B) value of 5.90. As of December 2023, promoters maintain a 35.11% stake in the company.
Conclusion:
The challenging Q3 results underscore the hurdles faced by Tech Mahindra in a dynamic and evolving IT landscape. The industry’s broader uncertainties have impacted the company’s financial performance, prompting close scrutiny from investors and industry analysts. The new leadership under Mohit Joshi will likely be closely watched for strategic initiatives aimed at overcoming these challenges and steering the company towards sustained growth.
Check Latest Q3 Earnings
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