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Revenue Growth Likely To Be Weakest Among Peers

A quarter of Tech Mahindra’s revenue comes from Europe.

Tech Mahindra Ltd., will be the last of the major technology services companies on the Nifty 50 to report December quarter results on January 30.

A CNBC-TV18 poll expects a muted quarter for the company with most parameters remaining flat as compared to the September quarter.

Tech Mahindra’s revenue growth of 0.6 percent from the September quarter is likely to be the weakest among its peers.

Tech Mahindra’s muted quarter is likely to be led by furloughs in hi-tech and other verticals, weakness in Europe and weak macroeconomic factors. The company had pointed out earlier that it will be exiting some non-profitable businesses. A quarter of Tech Mahindra’s revenue comes from Europe.

The lack of growth will also keep the margin expansion down to only 40 basis points on a sequential basis. Benefits of the rupee depreciation will be offset by the impact of furloughs and the lack of leverage on growth.

Weak macro economic factors and slow decision making will translate into muted deal wins. The company is likely to see new deal wins worth $600-$700 million, which is lower than the average of the last few quarters.

Given the increased macro uncertainty, the company’s flexibility to lower sub-contractor costs will be reduced. As a result, the cost structure is likely to remain elevated in the near term.

Shares of Tech Mahindra have corrected 30 percent over the last 12 months.

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