Tech Mahindra’s Q4FY13 Revenues Up By 7.23%

Tech Mahindra (Tech M) announced its Q4FY13 results post market hours on May 21, 2013. The numbers were robust and beat street expectations. This saw the company’s stock prices rising by more than 6% today.

In the quarter under review, Tech M’s revenues grew by 6.48% to Rs 1907.17 crore as compared to those of Q3FY13. In USD terms, the revenues grew by 7.23% to USD 353.2 million.

Taking a segmental view of this performance, strength was seen in the ‘Telecom Service Provider’ segment (contributes over 70% of Tech M’s revenues), which saw sequential growth of 11.24% in Q4FY13. However, a decline of 7.16% in the ‘Telecom Equipment Manufacturer’ segment and 3.37% in ‘BPO’ led to some moderation in its overall performance.

The higher revenues were also aided by the inorganic growth approach that Tech M has embarked upon. Its recent acquisitions of Hutchison Global Services and Comviva Technologies have resulted in the sequential strength seen.

Overall the performance of Tech M has demonstrated resilience. In the elapsed quarter, the revenues that the company has garnered from its top client, British Telecom (BT) declined massively to 25% of Tech M’s total revenues in Q4FY13 from 29% in Q3FY13 and remarkably so from an earlier high of 41% of its revenues in Q4FY11. Despite this decline, Tech M has managed to keep its performance from sliding. The 7% sequential growth clocked in Q4FY13 was despite BT’s significantly contribution to Tech M’s revenues in the period.

The company’s EBIT declined sequentially by 1.57% or 137 basis points to Rs 320.71 crore in Q4FY13. This is one point where the result of Tech M has been a little disappointing.

Tech M’s net profit increased by 36.80% sequentially to Rs 377.24 crore. However, it is important to note that in Q3FY13, the company had exceptional items of Rs 125.37 crore that were expensed on account of the settlement of a pending law suit against Mahindra Satyam filed by Aberdeen Global. At the same time, the exceptional items boosted the net profit by Rs 57.11 crore in Q3FY13. If both these figures were to be adjusted, the net profit of Tech M would see a decline of 20.19% in Q4FY13.

The company’s deal pipeline looks buoyant. In Q4FY13, the total number of active clients increased to 151 from 140 in Q3FY13. There has been significant traction coming in from recent acquisitions and from the clients of the to-be-merged Mahindra Satyam. This adds to significant surety of a robust performance in the future, and thus strengthens our positive outlook on this company.