Tech Mahindra – Paving the way through obstacles

Tech Mahindra is an Indian multinational information technology services and consulting company. The company belongs to the Mahindra Group with their headquarters in Pune and has its registered office in Mumbai. Tech Mahindra is a US$6.0 billion company with over 158,000 employees across 90 countries. The company was ranked 5th in India’s IT firms and 47th on Fortune India 500 list for 2019. On 25 June 2013, Tech Mahindra announced the completion of a merger with Mahindra Satyam. Tech Mahindra has 1262 active clients as of June 2022.

Tech Mahindra Limited has entered into share subscription agreement to acquire 26% equity shares in Upendra Singh Multi Transmission Private Limited. The acquisition would enable the Company to procure 1.5 MW of Solar Energy for its captive consumption at its facilities located in Noida, UP.

Tech Mahindra Ltd provides comprehensive range of IT services, including IT enabled service, application development and maintenance, consulting and enterprise business solutions, etc. to a diversified base of corporate customers in a wide range of industries.

Quarterly Earnings Walkthrough

Tech Mahindra has become the second large cap IT services firm in India after LTI-Mindtree. The company has registered a fall in its net profit for the December quarter by 5% Year-on-Year to ₹1,285 crore from ₹1,378 crore in the previous year. The net profit has grown by 1% sequentially.

The fall in net profit drop is because of the company faced unusual consequence during the last quarter, such as forex and lower other income. It will not be a major concern for the present times, and the company is geared up for comparatively stronger upcoming quarters.

The company’s net new deal wins have grown by 13% from a year ago to $795 million in Q3 against $704 million in third quarter of 2021-22.

The attrition rate was down to 17% for Q3 against 24% in the year ago, and is one of the lowest across the industry. Total headcount of the company was reported at 157,068 employees as of Q3FY23.

The financial services vertical has led the revenue contribution for most IT companies in India for Q3, Tech Mahindra registered the biggest portion of revenue arising from the communications, media and entertainment (CMI) vertical (39.8%), followed by manufacturing (15.7%), financial services (15.9%) and technology (10.3%).

The American market contributed 49% to Tech Mahindra’s revenue in Q3, followed by Europe (24%) and the rest of the World (26%).

Word from the board

CP Gurnani, chief executive of Tech Mahindra, said that “Our enterprise tech verticals scaled $1 billion in revenue for the very first time during this quarter, marking a positive outlook for Tech Mahindra in a weak December quarter. We were typically driven by communication, media and entertainment, so diversifying the portfolio comes at a good time for the company. Every global market is in a dynamic state right now, so it is hard to predict consistent growth figures at the moment. We are witnessing moderation in growth given the tough macroeconomic environment. We wilI continue to work with our customers to pre-empt their technological requirements and identify new demand drivers, especially for digital services”

Technical Analysis

TechM Weekly Candlestick Chart on Sharekhan’s TradeTiger

TechM stock price has repeatedly taken support on the 61.8% retracement level and faces resistance at the 50% retracement level. The stock has been consolidated in a range and is a good candidate for option trading strategies. TechM gained 13% during the month of February and closed with a gain of 8%. The price is above the 200-day exponential moving average and the MFI is at 78 points. Traders can short the stock as it has become overbought from the short-term perspective and the price faces resistance at the 50% retracement level. Investors can accumulate this stock at the present levels and when the price is near the moving average.

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