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Telecom recovery may be slower than expected
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Tech Mahindra — Q1 FY25
Tech Mahindra reported Q1 FY25 revenue of ₹13,005 crore, down 1.2% YoY, with EBIT margin expanding 110 bps QoQ to 8.5%, driven by Project Fortius cost savings.
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Tech Mahindra reported Q1 FY25 revenue of ₹13,005 crore, down 1.2% YoY, with EBIT margin expanding 110 bps QoQ to 8.5%, driven by Project Fortius cost savings. PAT stood at ₹851 crore (6.5% of revenue). Growth was led by manufacturing (+6.4% YoY) and healthcare (+6.1% YoY), while communications declined due to Comviva seasonality. Deal wins totaled $534 million, up 6.8% QoQ, diversified across verticals. Management highlighted early turnaround progress with focus on margin over revenue, but flagged continued telecom weakness and BFSI volatility due to small portfolio size. Guidance remains cautious: no wage hikes planned near-term, with margin levers expected to sustain improvement even in flat demand. Risk: telecom recovery may be slower than anticipated, and BFSI gains are from internal efforts rather than demand uptick.
टेक महिंद्रा ने पहली तिमाही में 13,005 करोड़ रुपये का कमाया, जो पिछले साल से 1.2% कम है। कंपनी का मुनाफा (EBIT) 8.5% रहा, जो पिछली तिमाही से 1.1% बढ़ा है। यह बढ़त प्रोजेक्ट फोर्टियस से बचत के कारण हुई। शुद्ध मुनाफा (PAT) 851 करोड़ रुपये रहा। सबसे ज्यादा ग्रोथ मैन्युफैक्चरिंग (+6.4%) और हेल्थकेयर (+6.1%) में हुई। दूरसंचार क्षेत्र में कमी आई। कंपनी को 534 मिलियन डॉलर के नए ऑर्डर मिले। प्रबंधन ने कहा कि वे मुनाफे पर ध्यान दे रहे हैं, कमाई पर नहीं। टेलीकॉम कमजोर है और बैंकिंग-वित्त (BFSI) में उतार-चढ़ाव है। फिलहाल वेतन बढ़ाने की योजना नहीं है। सावधानी: टेलीकॉम में सुधार धीमा हो सकता है।
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Read Transcript →Quarter Snapshot
Deal Wins TCV
$534M
+6.8% QoQ
Total contract value of new deal wins for the quarter, broad-based across verticals and regions.
Headcount (excl. interns)
~1,000 freshers added
flat QoQ
Approximately 1,000 freshers onboarded; total headcount flat after normalizing for BPS interns.
AI-enabled Associates
25,000+
increase from prior quarter
Over 25,000 associates trained in AI-led pair programming skills as part of upskilling.
DSO (including unbilled)
93 days
+1 day QoQ, -5 days YoY
Days sales outstanding increased 1 day sequentially but improved 5 days year-on-year.
What Changed vs Last Quarter
NEW
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.
NEW
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.
NEW
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%.
DROPPED
FY27 EBIT margin target of 15%+
Management targets exceeding 15% EBIT margins by FY27 through Project Fortius and operational improvements.
DROPPED
Above-peer average revenue growth by FY27
Revenue growth to exceed peer average by FY27, with FY25 as a turnaround year and gradual acceleration.
DROPPED
Project Fortius annual savings of $250M
Average annual savings of $250 million over three years from cost optimization initiatives.
DROPPED
Capital allocation: 85% FCF distribution
Board approved policy to distribute at least 85% of free cash flow over five years via dividends or buybacks.
NEW RISK
Telecom recovery may be slower than expected
Management noted telecom sector remains challenged; while decline moderated to single digits, no immediate upturn is expected.
NEW RISK
BFSI volatility due to small portfolio size
Management acknowledged that BFSI vertical is relatively small, so a few million dollars can cause quarter-to-quarter volatility.
NEW RISK
Potential disruption from GenAI on BPS contact center business
Analyst raised concern that BPS contact center services may be first impacted by GenAI; management downplayed but admitted contact center is under 5% of revenue.
NEW RISK
Unexpected furloughs in high-tech sector
Analyst asked about unseasonal furloughs; management confirmed one or two clients but said not material or widespread.
RISK GONE
Execution risk on margin roadmap
Achieving 15% EBIT margin by FY27 requires consistent execution of Project Fortius and pyramid restructuring, which may face delays.
RISK GONE
Continued telecom weakness
Communications vertical remains under pressure; recovery may be slower than expected, impacting overall growth.
RISK GONE
Integration of acquired companies
Portfolio companies need to be integrated effectively; past acquisitions have not always met expectations.
RISK GONE
Market environment dependency
Growth plan assumes no severe downturn; if macro worsens, revenue recovery may be delayed.
🤫 Topics management stopped discussing
Mentioned in Q1 FY24, Q2 FY24, Q4 FY24
Communications vertical remains under pressure; recovery may be slower than expected, impacting overall growth.
Fast read
Guidance and risk preview
Management communicated no wage hike currently, will reassess in second half of FY25 based on financial performance.
Management noted telecom sector remains challenged; while decline moderated to single digits, no immediate upturn is expected.
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