TECH MAHINDRA SHARES TUMBLE 17% ON WEAK EARNINGS

NEWDELHI: Shares of Tech Mahindra Ltd on Monday plunged as much as 17%, its steepest fall in over nine years, after the company reported weaker then expected earnings.

The stock touched a low of ₹357.60 a share—a level last seen on October 8, 2013, and fell as much as 16.7%, its steepest fall since January 22, 2008.

So far this year, it has fallen 22.2%. Consolidated profit for the quarter ended March 31 fell 31.2% to ₹590 crore. Analysts on average had expected Marchquarter consolidated profit of ₹783 crore, Thomson Reuters data showed. Revenue was up 9% to ₹74.95 crore.

Ebit margins dropped 420 basis points quarter-on-quarter to 8.2%, from 12.6% of analyst estimates. The management has contributed this fall due to restructuring of few contracts in LCC business, realignment in few deals in legacy business and currency appreciation. The margin drop was heightened due to the deferral of license sales in the Comviva operations.

“The fall in Ebit margin was related to one off restructuring and currency, pricing cuts in a large account would likely take time to recover. Growth has stabilised and even though margin should revive from current levels, this would be much slower than our previous estimates and remains a key concern,” said Jefferies India in a note to its investors. The brokerage house has downgraded the stock to “Hold” from “Buy” and cut its target price to ₹460 a share from ₹580.