Tech Mahindra's stock soars 10% post-results despite revenue and profit decline; CEO Joshi optimistic for FY25 amidst challenges.
In a striking turn of events on the trading floor, Tech Mahindra, a leading global provider of technology consulting and digital solutions, soared an impressive 10% in intraday trading, reaching a staggering Rs1,309 per share, as soon as the market opened today.
This rise comes shortly after the corporation announced its audited financial results for the quarter and fiscal year ending March 31st, 2024. The market’s resoundingly positive reaction not only reflects burgeoning confidence in Tech Mahindra but also serves as a resounding endorsement of the company’s visionary strategies for the road ahead.
Q4 Result at glance
Tech Mahindra has navigated through various challenges, demonstrating resilience and adaptability in a dynamic market.
Revenue Decline: Tech Mahindra experienced a decline in revenue for both the quarter and the fiscal year ended March 31st, 2024. Quarterly revenue decreased by 1.6% QoQ and 7.2% YoY in USD terms, and by 1.8% QoQ and 6.2% YoY in INR terms. Similarly, annual revenue saw a drop of 5.0% YoY in USD terms and 2.4% YoY in INR terms.
Profit Decrease: The company faced a significant decrease in profits, reflecting the challenges in maintaining margins and operational efficiency. Quarterly profit after tax (PAT) declined by 41.5% YoY in USD terms and 40.9% YoY in INR terms. Similarly, annual consolidated PAT dropped by 52.2% YoY in USD terms and 51.2% YoY in INR terms.
EBITDA Reduction: Tech Mahindra witnessed a notable decrease in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), indicating pressure on operational performance. Quarterly EBITDA declined by 31.1% YoY in USD terms and 30.3% YoY in INR terms. Similarly, annual EBITDA saw a significant drop of 39.5% YoY in USD terms and 38.2% YoY in INR terms.
PAT QoQ increase: Tech Mahindra experienced a 29.5% QoQ growth in USD and INR terms, but experienced a significant decline in annual PAT by 52.2% YoY in USD and 51.2% YoY in INR terms, indicating broader challenges and market conditions faced by the company throughout the fiscal year.
Dividend proposed: The board has proposed a final dividend of Rs28 per share. When combined with the interim dividend of Rs12, the total per share payout will amount to Rs40.
Tech Mahindra’s Optimistic Future Plan
In a recent statement, Mohit Joshi, Chief Executive Officer and Managing Director of Tech Mahindra, expressed optimism for the company’s performance in the fiscal year 2025 (FY25).
Joshi highlighted Tech Mahindra’s unique ability to provide transformative solutions at unparalleled speed, setting the company apart from competitors. Despite the challenges faced in FY24, particularly within the IT services sector amidst global economic uncertainties, Joshi noted a significant push towards digital adoption, indicating a promising trajectory for the company.
Against a backdrop of heightened geopolitical turmoil and rapid advancements in AI capabilities, Joshi emphasized the importance for organizations to address, adapt, or defend their businesses more than ever before.
“In FY25, this year will be better than the previous year in the world of heightened geopolitical turmoil, coupled with fast-evolving AI capabilities. Organizations have to either address, adapt, or defend and insulate their businesses like never before. They will thus turn to a technology partner like Tech Mahindra, who can help them to transform at speed to bring agility, resilience, and efficiency to their businesses.” Joshi says
Rohit Anand, Chief Financial Officer of Tech Mahindra, echoed Joshi’s sentiments, citing robust cash generation in the previous quarter (Q4FY24) and improvements in deal wins and operating margins. Anand expressed confidence that these positive trends would lead to steady earnings growth in the coming years. He reaffirmed the company’s commitment to operational excellence and cost savings, aiming to deliver superior shareholder returns.
Tech Mahindra’s strategic roadmap, termed ‘Vision 2027’, is centered around organizational restructuring, phased business enhancements, and strategic investments. The company plans to capitalize on synergies within the Mahindra Group and launch Project Fortius to boost margins according to reports.
In FY26, Tech Mahindra will transition into the ‘Stabilization Phase’ to sustain investment momentum and drive forward Project Fortius. By FY27, it anticipates entering the ‘Reaping Returns’ phase, reaping the benefits of long-term structural alignment and ongoing pyramid improvement.
Additionally, Tech Mahindra will prioritize the development of its telco, manufacturing, BFSI, and AI verticals. By FY27, the company aims to achieve an EBIT margin expansion to 15% and surpass peer average in terms of revenue growth.
(Inputs from news dailies and official announcements)
