Tech Mahindra Q3 revenue up by 1.29 per cent

India's fifth largest software service company Tech Mahindra (TechM) announced its nine month ending quarterly results on Tuesday. In Constant Currency (CC) terms the consolidated operating revenue increased by 1.2 per cent quarter on quarter (QoQ) while net profit decreased by 3.36 per cent QoQ. 

On financial front the consolidated net revenue from operations of TechM reached Rs 6701 crores in Q3FY16 compared to Rs 6616 crores in Q2FY16, an increase of 1.29 per cent QoQ. The EBITDA stands at Rs 1136 crores this quarter compared to Rs 1101 crores in Q2FY16, an increase of 3.15 per cent QoQ. The EBITDA margin this quarter stands at 16.95 per cent compared to 16.64 per cent in Q2FY16. The employee expenses of company increased by 0.44 per cent QoQ to Rs 3484 crores from Rs 3468 crores in Q2FY16. The net profit stands at Rs 759 crores in Q3FY16 compared to Rs 786 crores in Q2FY16, a decrease of 3.36 per cent QoQ. 

In USD terms, the consolidated operating revenue increased by 0.4 per cent QoQ and reached USD 1015 million. In CC terms the growth is of 1.2 per cent QoQ. The EBITDA stands at USD 172 million, an increase of 2.5 per cent QoQ. The net profit stands at USD 115 million, down 3.7 per cent QoQ. 

The nine month ending consolidated net revenue from operations increased by 18.81 per cent and reached Rs 19610 crores compared to Rs 16504 crores for the same period last year. The net profit for the same six month period stands at Rs 22209 crores compared to Rs 21556 crores, an increase of 3 per cent from same period last year.

Communications is the largest industry segment, accounting for 51.3% of Tech Mahindra’s $3.68 billion in revenue, while manufacturing and banking; financial services and insurance contribute 17.1% and 10%, respectively.

A declining share of business from Tech Mahindra’s largest clients; and fewer customer additions are hurting revenue growth. The company continued to struggle to record sustained growth as reflected in a decline in the US, its largest market. Business from the US, which accounts for 48% of revenue, declined 1.7%, while client spending in Europe did not report any growth. 

Further, 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 previous year. The company added 13 clients to take the total number of active clients to 788, as against the 18 clients added in the July-September period.