By Haripriya Suresh
BENGALURU (Reuters) – Indian IT services company Tech Mahindra said on Saturday that revenue grew more than expected in the three months through September, helped by growth in European and other non-U.S. markets, as well as banking, financial services and insurance (BFSI) segment.
Revenue rose 3.49% to 133.13 billion rupees ($1.58 billion) for the financial second quarter from the same period last year, surpassing the average analyst estimate of 131.9 billion rupees, according to data collected by LSEG.
Tech Mahindra continued to see weakness in its communications segment, which accounts for a third of total revenue.
Higher financing costs coupled with macroeconomic and geopolitical risks have prompted customers to curb their spending on discretionary technology spending.
“Our key telecom customers continue to prioritize cost savings and their spending on discretionary projects is limited,” CEO Mohit Joshi said in a post-earnings call. Joshi said there are customer-specific pressures in this segment in the US.
The Pune-based company recorded revenue growth of 4.5% in its BFSI segment and 2.4% in its Hi-Tech and Media segment, with Europe up 4.1% and the rest of the global market grew by 9.7%.
Net profit rose 153% to 12.5 billion rupees ($149 million), helped by one-off gains from land sales, and together with furniture and inventory, led to other income of 5.2 billion rupees.
Tech Mahindra’s order bookings fell to $603 million from $640 million in the same quarter last year.
In April, the company unveiled a three-year turnaround plan aimed at increasing sales and doubling operating margins to 15% by fiscal 2027, after several quarters of slowing growth and a significant decline in margins.
Joshi said these are the early stages of a turnaround for the company, and they expect “some volatility in the telecom and BFSI portfolios” going forward.
The results are a signal toward a positive trend, said Gaurav Parab, chief research analyst at NelsonHall.
“Mohit Joshi’s strategic initiatives around restructuring, targeted account management and margin improvements are now starting to take root, although significant results will take a few more quarters,” he said.
($1 = 84.0650 Indian Rupees)
