Tech Mahin­dra 3Q rev­enue in­creases 0.36pc

The Pak Banker - - COMPANIES/BOSS -

Tech Mahin­dra Ltd, In­dia's fifth largest soft­ware ser­vices ex­porter, said fis­cal third-quar­ter rev­enue in dol­lar terms rose 0.36% se­quen­tially, marginally faster than an­a­lyst es­ti­mates, al­though the com­pany con­tin­ued to strug­gle to record sus­tained growth as re­flected in a de­cline in the US, its largest mar­ket.

A de­clin­ing share of busi­ness from Tech Mahin­dra's largest clients and fewer cus­tomer ad­di­tions hurt rev­enue growth. Wor­ry­ingly for the com­pany, Tech Mahin­dra, which has recorded a rev­enue of $3.01 bil­lion in the nine months of this fis­cal, now needs to grow at 3% in the cur­rent Jan­uary-March pe­riod if the firm wants to end the fis­cal year with a growth of more than 10%. Tech Mahin­dra does not give any fore­cast but since the com­pany re­ported a 0.5% se­quen­tial growth in the first quar­ter and a 2.2% rise in the se­cond quar­ter, amid un­cer­tainty over tech­nol­ogy spends from man­age­ment com­men­taries at large in­for­ma­tion tech­nol­ogy (IT) firms, this will be a tall task. Tech Mahin­dra grew 19% last year.

Tech Mahin­dra, part of the $16 bil­lion Mahin­dra Group, saw its rev­enue in dol­lar terms rise to $1.01 bil­lion, higher than Bloomberg an­a­lyst es­ti­mates of $998.63 mil­lion. Net profit was down 3.7% from the pre­ced­ing Septem­ber quar­ter to $115 mil­lion, marginally beat­ing an­a­lyst es­ti­mates of $114.3 mil­lion. In ru­pee terms, the com­pany's rev­enue in­creased 1.3% from the pre­ced­ing quar­ter to Rs.6,701 crore even as net profit jumped 3.4% to Rs.759 crore. An­a­lysts had been ex­pect­ing a net profit of Rs.772.7 crore on a rev­enue of Rs.6,749.3 crore, ac­cord­ing to a Bloomberg sur­vey.

The man­age­ment of Tech Mahin­dra put up a brave face. "I'm very con­scious that typ­i­cally this quar­ter is not con­sid­ered the best of the quar­ters be­cause of the hol­i­day sea­son… but, over­all, when we look back, it has been a good per­for­mance...our mar­gins have im­proved pri­mar­ily due to im­proved uti­liza­tion and ru­pee de­pre­ci­a­tion," Tech Mahin­dra man­ag­ing di­rec­tor and chief ex­ec­u­tive of­fi­cer C.P Gur­nani said in an in­ter­view.

Tech Mahin­dra's abil­ity to gen­er­ate more busi­ness from its ex­ist­ing clients con­tin­ued to be a chal­lenge. Its share of busi­ness from its top 20 clients con­tin­ued to de­cline. Tech Mahin­dra's top 20 clients now ac­count for 52% of its rev­enue, as against 61% in the year-ago pe­riod. The com­pany added 13 clients to take the to­tal num­ber of ac­tive clients to 788, as against the 18 clients added in the Ju­lySeptem­ber pe­riod.

"It has been a chal­leng­ing year, no doubt about it; but (hav­ing) around 10% growth (in) US dol­lar is rea­son­ably sat­is­fy­ing," chief fi­nan­cial of­fi­cer Milind Kulka­rni said in an in­ter­view. "Ob­vi­ously, on the mar­gin front, we have not done all that well." An­other worry ahead of Tech Mahin­dra is its abil­ity to in­te­grate the firms it has bought. Tech Mahin­dra, along with par­ent Mahin­dra and Mahin­dra Ltd, bought Ital­ian car de­signer Pin­in­fa­rina SpA last year, and has also spent $240 mil­lion to buy US-based Light­bridge Com­mu­ni­ca­tions Corp. (LCC) and Geneva-based con­sult­ing and ser­vices firm Sofgen Hold­ings in the last two years.

"In­te­grat­ing a large ac­qui­si­tion is never an easy task. We have done in the past. That is some­thing that al­ways takes time," said Kulka­rni. "In LCC, we have dis­con­tin­ued some of the non-prof­itable busi­ness. That's im­pact­ing some of the rev­enue growth in LCC. We have dis­con­tin­ued some of the busi­nesses in Au­gust-Septem­ber. But we are re­ally ex­pect­ing an im­prove­ment in per­for­mance in the next three to four quar­ters."

Busi­ness from the US, which ac­counts for 48% of rev­enue, de­clined 1.7%, while client spend­ing in Europe did not re­port any growth. "The man­age­ment has said that there are chal­lenges in the en­ergy and com­mu­ni­ca­tions sec­tors. It has also talked about chal­lenges in in­te­grat­ing the com­pa­nies ac­quired. So, ob­vi­ously, ex­e­cu­tion will be the fo­cus.

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