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BusinessLogr > Industry > Tech Mahindra’s revenue finally stabilizes in September quarter
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Tech Mahindra’s revenue finally stabilizes in September quarter

deep
Last updated: 2015/11/09 at 11:43 AM
deep Published November 9, 2015
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There’s nothing much in Tech Mahindra’s results to get excited about, and meanwhile, the company’s shares have risen by almost 20% from its lows in early July. Photo: Hemant Mishra/Mint

There’s nothing much in Tech Mahindra’s results to get excited about, and meanwhile, the company’s shares have risen by almost 20% from its lows in early July. Photo: Hemant Mishra/Mint

Tech Mahindra Ltd’s results for the September quarter were on expected lines. Revenue grew by 2.2% in dollar terms, and operating profit margin rose 160 basis points to 16.6%. Analysts at JPMorgan Chase and Co. had estimated revenue to grow by 2% in dollar terms and margins to expand by 150 basis points. After two successive quarters of declining/muted growth, Tech Mahindra has finally managed to see some stability in revenue.

Unlike analysts’ expectations, growth in the telecom segment was a tad higher at 2.6%, while the non-telecom or enterprise segment lagged with growth of 1.8%. Most analysts had estimated that the enterprise segment will drive growth, especially after the company said during the June quarter results that the communication business has been hit on account of delayed decision making.

Of course, Tech Mahindra’s deal with Comverse Inc. earlier this year is expected to have contributed around $8 million to incremental revenues. Adjusted for this, growth of the telecom business was 1.1% and overall growth was around 1.4%. Evidently, this is nothing to get excited about.

Some analysts are also worried about the drop in dollar revenue in the manufacturing and banking and financial services segments. The company told analysts in a conference call that revenue from the manufacturing segment rose marginally after adjusting for cross-currency movements, and that revenue from the banking and financial was flat in cross-currency terms.

Still, it’s clear that Tech Mahindra is still far from being out of the woods. After adjusting for acquisitions, revenue was flat on a year-on-year basis, according to one analyst. The company’s management reiterated that decision making cycles have become longer. Besides, during the December quarter, some of the industries Tech Mahindra services take furloughs, which may also hit growth.

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The company did well to reduce the debtor days from 113 days in the June quarter to 108 days in the September quarter. The resultant improvement in cash flow generation is heartening, although there’s still much scope to improve. All told, there’s nothing much in Tech Mahindra’s results to get excited about, and meanwhile, the company’s shares have risen by almost 20% from its lows in early July.

The writer does not own shares in the above-mentioned companies.

[“source -livemint”]

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TAGGED: stabilizes in September quarter, Tech Mahindra’s revenue finally
deep November 9, 2015
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