Subcontracting cost target below 10% of revenue
Management aims to reduce subcontracting costs from current 14% to below 10% of revenue over the next few quarters.
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Techm · forward-looking guidance across the available source record.
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margins
H2 recovery expected with gradual improvement
Management expects first half to be tough but second half to see recovery, driven by deal closures and cost actions.
Offshoring improvement of 3-4% headroom
Management sees potential to improve offshoring mix by 3-4% in the medium term, which would boost margins.
No wage hikes in near term; revisit in H2
Management communicated no wage hike currently, will reassess in second half of FY25 based on financial performance.
Margin improvement levers sufficient even in flat demand
Management stated they have enough internal levers to improve margins even without revenue growth, prioritizing margin over revenue.
Effective tax rate expected 26%-27% for FY25
CFO guided that normalized effective tax rate for the year will be in the range of 26%-27%.
FY26 revenue to be better than FY25
Management expects FY26 revenue growth to exceed FY25 levels, driven by deal conversions and stabilization in key verticals.
FY27 margin target of 15% remains intact
Despite macro uncertainty, the company reaffirms its FY27 EBIT margin target of 15%, contingent on growth assumptions.
Revenue growth to improve from Q2 FY26
Large deal wins from previous quarters are expected to start contributing to revenue from Q2 onwards.
Effective tax rate of ~27% for FY26
CFO guided that the effective tax rate for FY26 will be around 27%, normalizing from a one-time refund in Q4.
Rationalization actions to continue in Q3 FY24
Management intends to complete portfolio rationalization by Q3, with one-time costs expected to normalize margins by Q4.
Medium-term margin and revenue plans to be shared in April 2024
New CEO Mohit Joshi will present detailed plans for margins, revenue, and organization structure in April 2024.
New organization structure effective January 1, 2024
Six strategic business units will be created to improve client intimacy and operational efficiency.
FY27 margin target remains unchanged
Management reiterated commitment to significant and predictable margin expansion by FY27, driven by Project Fortius and operational efficiencies.
Fresher hiring target of 6,000+ for FY25
Company is on track to hire over 6,000 fresh graduates this fiscal year, with 2,000+ already onboarded in H1.
Subcon cost reduction to single-digit percentage of revenue
Management expects to reduce subcontractor costs as a percentage of revenue to single digits over time, supporting margin expansion.
Second-half investments slightly heavier than first half
Investments under Project Fortius (1.5% of margins) will be slightly more in H2 vs H1, but not materially different.
Second half of FY26 expected to be better than first half
Management expects improved performance in H2 driven by operational efficiencies and improved demand visibility, despite seasonal furloughs in Q3.
EBIT margin target of 15% by FY27 remains intact
Management reiterated commitment to reaching 15% EBIT margin by FY27, with continued margin expansion each quarter.
Net new deal TCV expected to approach $1 billion
Management aims to increase quarterly net new deal TCV closer to $1 billion, up from current $816 million, driven by a rich pipeline.
Capital allocation policy: return 85%+ of free cash flow to shareholders
Board recommended dividend of INR 15 per share; committed to returning at least 85% of free cash flow to shareholders.
Telecom sector not bottomed out; volatility expected for next couple of quarters
Management sees continued stress in telecom with no immediate recovery, though the worst of the decline is likely behind.
Normalized EBIT margin of 7% is the bottom operationally
CFO stated that 7% EBIT (adjusted) is the operational bottom, with potential for improvement from Q4 onwards, excluding impairment charges.
Detailed strategic plan to be shared in April extended earnings call
Management will provide a multi-year turnaround plan including revenue, margin, and investment timelines in the next quarterly call.
Target to train 100% of IT talent in AI by FY25
COO stated plan to train all IT professionals in AI/GenAI capabilities over the next fiscal year.
FY27 EBIT margin target of 15%
Management reiterated commitment to achieving 15% EBIT margin by FY27 through Project Fortius, pricing optimization, and productivity gains.
Wage hike impact of 1-1.5% in Q4
Wage hikes effective Q4 FY25 will impact margins by 1-1.5%, but operating levers are expected to partially offset.
Industry-leading growth by FY27
Management aims to deliver growth higher than peer average by FY27, supported by large deal pipeline and portfolio rebalancing.
Continued investment in GenAI and partnerships
TechM will continue investing in GenAI capabilities, including sovereign LLMs, agentic AI, and partnerships with NVIDIA, AWS, and ServiceNow.
FY27 revenue growth above peer average
Management expects to grow higher than the peer average by the end of FY27, supported by strong deal pipeline and large client momentum.
FY27 EBIT margin target of 15%
Company remains on track to achieve 15% EBIT margin by FY27, driven by continued operational improvements and gross margin expansion.
Large deal ramp in H1 FY27
The $500M+ European telco deal will start ramping in the first half of FY27, contributing to revenue growth.
FY27 EBIT margin target of 15%+
Management targets exceeding 15% EBIT margins by FY27 through Project Fortius and operational improvements.
Above-peer average revenue growth by FY27
Revenue growth to exceed peer average by FY27, with FY25 as a turnaround year and gradual acceleration.
Project Fortius annual savings of $250M
Average annual savings of $250 million over three years from cost optimization initiatives.
Capital allocation: 85% FCF distribution
Board approved policy to distribute at least 85% of free cash flow over five years via dividends or buybacks.
FY27 EBIT margin target of 15%
Management reiterated commitment to 15% EBIT margin by FY27, with linear improvement expected through Project Fortius and portfolio mix.
Revenue growth ahead of peer average by FY27
Goal to achieve revenue growth above peer average by FY27, supported by deal wins and market share gains.
Quarterly deal wins range of $600M-$800M
CFO indicated that the current deal win range of $600M-$800M per quarter is sufficient to support growth targets, with potential to increase if environment improves.
Continued investment in service lines and talent
Planned investments in service line capabilities, ecosystem, and talent, including consulting and AI, with ~1% margin impact from wage hikes and investments.