Tech Mahindra on track surpass FY20 revenues by fourth quarter: CFO Bhat

Manoj Bhat, chief financial officer, Tech Mahindra
Tech Mahindra is "well on track" to surpass the last year revenue figure on the back of strong deal pipeline and growth revival across all industry verticals. The Pune-headquartered firm is also close to reaching pre-Covid 19 levels in terms of absolute profit. That's according to its Chief Financial Officer Manoj Bhat.

"Directionally, I think it (pre-covid 19 levels) should be pretty soon in terms of profit. On the revenue side, we should equal or surpass what we did last year in the next two quarters," said Bhat in an interview to Business Standard.  "The metrics around the deal wins, pipeline indicate we are moving the right direction. It is not a question of if, it's a question of when."

This comes as the Pune-headquartered company's net new deal wins stood at $421 million at the end of September quarter. It reported a 5.3 per cent decline in net profit at Rs 1,064 crore in Q2FY21 on a year-on-year (YoY) basis owing to higher employee costs and other expenses. However, on a sequential-quarter basis, the net profit grew 9.5 per cent. Revenue for the quarter stood at Rs 9,372 crore, a growth of 3.3 per cent YoY and 2.9 per cent sequentially. The dollar revenue at $1,265.4 million, saw an increase of 2.9 per cent QoQ in constant currency terms. 

Bhat also said the bulk of 5G spends remain pushed six months into FY22 as telecom operators are playing cautious and expect real Covid-19 impact to show up after December after the governments' stimulus packages are exhausted globally. Communications businesses contribute around 40 per cent of the company's overall revenue. It has, however, seen a 5.8 per cent fall YoY in terms of segmental revenue. 
Tech Mahindra also inked an agreement with Rakuten Mobile recently, under which the Indian tech firm will be a preferred partner and provide technologies as well as software capabilities to support the development and deployment of mobile networks for global customers of Rakuten Communications Platform (RCP).

"This (partnership) is about creating a whole new 5G stack for Rakuten which will be theirs. But we are the preferred partner to develop and potentially resell. We are in the development phase right now in the next two to four quarters, we should see how that pans out in terms of finding opportunities to take it to market. It is definitely not a short term partnership," he added.

The offshore revenue mix for the Mahindra Group company is at 37 per cent currently. It is much lower compared to Wipro's 50.4 per cent while for Infosys the metric stood at 73.9 per cent. The company said there may not be a "significant" change in the mix as their network and mortgage services are onsite centric. "We also do onfield benchmarking studies for telecom operators that are necessarily local and can't be done offshore. So we may not hit the peers in this metric."

Tech Mahindra also said the minimum wage hike for H1B visa holders and US elections may not impact the company as around two-third of their workforce in the US is already visa independent.

Highlights

. Mahindra Group company may equal or surpass last year's revenue by Q4.

. 5G spends remain pushed six months into FY22 as telecom operators are playing cautious and expect real Covid-19 impact to show up after December.

. Tech Mahindra reported a 5.3% fall (YoY) in net profit at Rs 1,064 crore and revenue for the quarter rose 3.3 per cent to Rs 9,372 crore in Q2.

. It expects 5G communication platform deal with Rakuten to be ready in the next 2-4 quarters.


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