In the year-ago period, Tech Mahindra had reported 12.4 per cent year-on-year (YoY) rise in consolidated net profit at Rs 897.9 crore while the consolidated revenue stood at Rs 8,276.3 crore, up 12.8 per cent YoY. In dollar terms, Tech Mahindra’s profit grew 6.5 per cent to $131.8 million, while revenue was up 7.5 per cent YoY to $1.22 billion.
As per Nirmal Bang Securities, the company is likely to post a revenue of Rs 8,874.4 crore, up 7.2 per cent YoY. Sequentially, the numbers are expected to drop 0.2 per cent. It has factored in 1 per cent QoQ CC (constant currency) revenue growth and around 40bps cross-currency headwind leading to a growth of 0.6 per cent in US dollar terms. It sees EBIT to come in at Rs 1,149.7 crore, up 6.8 per cent YoY (down 16 per cent QoQ).
At the bourses, shares of Tech Mahindra have under-performed the market by falling 9 per cent during April-June 2019 quarter. In comparison, the benchmark S&P BSE Sensex has gained nearly 2 per cent, while the S&P Bse IT index has risen around 2.50 per cent, ACE Equity data show.
"Tech Mahindra will disappoint with revenue decline of 85 bps and cross-currency headwind of 65 bps. Revenue growth has slowed down to a trickle on yoy comparison. We expect sequential EBIT margin decline of 250 bps contributed by 100 bps impact from wage revision, higher visa applications, Rupee appreciation and seasonal impact of lower Comviva revenues," says a note from Kotak Securities. The brokerage also expects the company's 6-8 per cent revenue growth expectation for FY20 could move to the lower end of the band.
Key things to watch out for in the commentary include timeline for 5G deal flow and impact of US ban on Huawei on 5G adoption, health of enterprise business especially in the manufacturing vertical where the company has high exposure to the auto sector, reasons for slowdown in revenue growth in the enterprise segment, and M&A strategy and capital allocation.
So far in the Tier-1 IT space, Infosys and Tata Consultancy Services (TCS) have delivered a good performance for the April-June quarter, while Wipro disappointed the street with weak numbers and muted revenue guidance for FY20.