Tech Mahindra, a prominent player in the IT industry, recently unveiled its financial results for the second quarter of the fiscal year 2023 (Q2FY24). The earnings report revealed a notable decline in profit after tax (PAT) and revenue, raising concerns among investors and industry experts.
Let’s dissect the critical takeaways from Tech Mahindra’s Q2 scorecard:

Revenue Decline

Tech Mahindra’s consolidated revenue from operations for Q2FY24 showed a 2 per cent YoY decline, amounting to ₹12,863.9 crore. In US dollar terms, the revenue amounted to $1,555 million, marking a 5.1 per cent YoY decrease and a 2.8 per cent QoQ drop. The Communications, Media, and Entertainment (CME) vertical suffered the most, with an 11.5 per cent YoY decline, while the Banking, Financial Services, and Insurance (BFSI) segment also reported a 6.3 per cent YoY drop. Manufacturing and Technology segments were exceptions, with 5.7 per cent and 2.8 per cent YoY growth, respectively.

Geographical Markets in Decline

Tech Mahindra’s revenue decline was not limited to specific segments, as all key geographical markets reported YoY decreases. Europe witnessed an 8.6 per cent decline, the Americas saw a 0.5 per cent YoY drop, and the ‘Rest of the World’ market experienced an 11 per cent YoY decrease in revenue.

Profit Plunge

Consolidated profit after tax (PAT) in Q2FY24 amounted to ₹505.3 crore, representing a staggering 61.1 per cent YoY decline from ₹1,299.2 crore in Q2FY23. In terms of dollars, the company’s profit after tax (PAT) decreased by 29.3% QoQ and 62.5% YoY to $59 million. The profit attributable to the company’s owners reached ₹493.9 crore, a significant drop from ₹1,285.4 crore YoY.

EBITDA Challenges

Tech Mahindra’s EBITDA for Q2FY24 was ₹1,072 crore, a 19.9 per cent QoQ decline and a substantial 46 per cent YoY drop. In terms of US dollars, EBITDA stood at $129 million, reflecting a 20.5 per cent QoQ decrease and a 47.3 per cent YoY reduction. EBITDA margins also fell, declining by 190 basis points QoQ and 680 basis points YoY, settling at 8.3 per cent.

Dividend Announcement

Despite the challenging financial results, Tech Mahindra’s board approved an interim dividend of ₹12 per share of ₹5 each, which is 240 per cent of the face value. The interim dividend payment will be made on Tuesday, November 21, 2023. The record date is Thursday, November 2, 2023.

Headcount Growth

Tech Mahindra’s total headcount in Q2FY24 increased to 1,50,604, marking a growth of 2,307 employees compared to the previous quarter.

Summary

Despite these challenges, Tech Mahindra remains a significant player in the IT industry, and investors and industry analysts will closely observe its strategic moves in the coming quarters. The company’s ability to adapt and recover from this challenging quarter will shape its future performance.

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