India's Tech Mahindra Misses Q3 Revenue View

Tech Mahindra, a leading Indian IT services company, has reported a mixed performance in the third quarter of 2024, with a revenue miss and a decline in profit. The company's revenue fell short of analysts' expectations, while its profit dropped by 21.4% on a sequential basis. Despite the challenges, Tech Mahindra managed to expand its EBIT margin, which increased by 181 basis points to 5.36%.



The company's revenue miss can be attributed to several factors, including weakness in key verticals, furloughs, reduced client spending, and a decline in deal wins. The communications, media, and entertainment vertical, which is Tech Mahindra's largest in terms of revenue, saw a 13.4% drop. Additionally, spending remained muted in areas like banking, financial services, and insurance (BFSI) and hi-tech. Net new deal wins more than halved to $381 million from $795 million in the same period last year.

Tech Mahindra's EBIT margin expansion was driven by targeted actions under Project Fortius and a steady increase in new deal wins across prioritized verticals and markets. Despite cross-currency headwinds during the quarter, the company managed to achieve this margin expansion, reaffirming its commitment to long-term goals. The company's CEO, Mohit Joshi, stated that the growth in EBIT margin and operating PAT, both on a sequential and year-on-year basis, was a result of these targeted actions and increased deal wins.



Tech Mahindra has undertaken several strategic initiatives to improve its financials, including Project Fortius, optimizing working capital management, exiting non-core, low-margin businesses, realigning the organization, and strengthening key verticals. These initiatives have contributed to the company's overall performance, despite the mixed outcomes in different market segments.

In conclusion, Tech Mahindra's Q3 performance was marked by a revenue miss and a decline in profit. However, the company managed to expand its EBIT margin, driven by targeted actions and increased deal wins. Tech Mahindra has implemented several strategic initiatives to improve its financials and maintain its competitive edge in the IT services industry. As the company continues to navigate the challenges in the market, investors will be watching closely to see how Tech Mahindra's strategic initiatives translate into improved financial performance in the coming quarters.