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Tech Mahindra Net Profit Drops
Tech Mahindra, India's fifth-largest IT services company, announced a 60.6% fall in net profit for the third quarter of FY24, the fourth consecutive quarter of double-digit profit declines. The net profit was ₹510.4 crore, demonstrating a substantial squeeze in profit margins.
Source: (1)
Source: (2)
Despite this, there was a sequential increase of 3% over the previous quarter's ₹494 crore. Ideally, Tech Mahindra shares fell about 6% year-on-year, closing at ₹1,325. The modest profits have sparked market fears, prompting Tech Mahindra's shares to fall to their lowest point in over three years.
The company's market capitalization decreased by ₹8,407.73 crore, to ₹1,29,011.81 crore. Tech Mahindra is now the largest laggard among Sensex and Nifty businesses. Although analysts see CEO Mohit Joshi's restructuring measures optimistically, they are thought to have resulted in The.
Analysts believe that the stock will underperform its competitors. The Q3 figures show a 60% fall in net profit to ₹510.4 crore and a 4.6% decrease in revenue to ₹13,101 crore YoY. Operating margins fell to 5.4%, compared to 12% the prior year.
Downturn Trend
The hard quarter mirrors a larger trend in the IT industry, with Tech Mahindra being the most recent to experience a downturn in demand. Particularly, in verticals such as hi-tech, telecom, and financial services.
The company's deal wins were more than halved to $381 million, and operating margins fell 660 basis points to 5.4%, the lowest among the top five Indian IT services companies. Despite the setbacks, CEO Mohit Joshi is still focused on realigning the organisation under the new structure.
The leadership intends to expand into categories like BFSI, healthcare, and Lifesciences to lessen reliance on the Communications, Media, and Entertainment (CME) industry, which now accounts for roughly 40% of the company's revenue.
Joshi predicts a recovery in BFSI and healthcare in the next six to nine months. The restructuring and organisational reforms, which went into effect on January 1, are intended to enhance the company's foundations, with an emphasis on internal realignment.
The CEO expressed confidence in the year's strong cash conversions and stated that he intends to maintain operational rigour in other areas. As Tech Mahindra navigates a hard quarter, we shall keep a careful eye on its recovery tactics and how the business positions itself in the changing IT services sector.
For more info about the Q3 results: (3)
