Tech Mahindra’s deal momentum and margin gains strengthen FY27 growth outlook

Investment View and Valuation

Prabhudas Lilladher’s October 16, 2026 Q2 FY27 result update on Tech Mahindra characterised the quarter as strong execution that reached a committed milestone. The broker retained its BUY recommendation and raised its target price to Rs 1,910 from Rs 1,900.

The positive view is based on a revenue and margin beat, sustained deal momentum, improving growth visibility and an ongoing margin recovery supported by Project Fortius savings and operating leverage. The target price is based on an unchanged 20 times price-to-earnings multiple.

Q2 FY27 Financial Performance

Tech Mahindra reported Q2 FY27 IT services revenue of US$1.69 billion, up 2.4 per cent quarter-on-quarter in constant currency and 2.0 per cent in US dollar terms. This exceeded Prabhudas Lilladher’s 1.2 per cent constant-currency growth estimate and consensus expectations of 1.5 per cent. Overall revenue was Rs 16,180 crore, up 15.6 per cent year-on-year.

Manufacturing declined after accelerated execution of a large European automotive programme in Q1. Q2 FY27 EBIT margin expanded 40 basis points quarter-on-quarter to 14.8 per cent, ahead of both the broker and consensus estimate of 14.4 per cent. Strong volume growth and Project Fortius savings more than offset wage-hike effects. EBITDA margin was 17.8 per cent, while reported profit after tax was approximately Rs 1,600 crore, below the broker estimate of Rs 1,800 crore.

Operating indicators improved, with net employee additions of 5,446, utilisation excluding trainees rising 190 basis points quarter-on-quarter to 88.9 per cent and last-twelve-month attrition declining 10 basis points to 11.7 per cent. Tech Mahindra also declared an interim dividend of Rs 15 per share and a 1:1 bonus equity share issue.

Deal Momentum and Growth Visibility

Deal wins remained a key support for revenue visibility. Net-new deal total contract value was US$1.023 billion in Q2 FY27, marking the fourth successive quarter with more than US$1 billion of wins. Last-twelve-month deal wins reached US$4.27 billion, up 34.8 per cent year-on-year.

Management reiterated that Tech Mahindra should grow faster than the peer average in FY27E, supported by the order book and timely deal ramp-ups. Management highlighted opportunities in AI-led operational transformation, fibre and network modernisation, B2B platform modernisation and AI-led product engineering.

Helix investments are progressing from pilots to larger core-process implementations. More than 24,000 associates have been upskilled on AI productivity tools, over 4,500 on agent platforms and about 48,000 hold AI certifications.

Broker Forecast Revisions and Margin Outlook

Prabhudas Lilladher increased its FY27E and FY28E constant-currency revenue growth assumptions to 7.0 per cent and 5.8 per cent from 6.0 per cent and 5.4 per cent, respectively, while retaining its FY29E growth assumptions. It raised FY27E EBIT margin to 15.0 per cent from 14.8 per cent.

The broker expects wage-hike effects to be behind Tech Mahindra in the second half of FY27, allowing Project Fortius and operating leverage to support margins. Continuing investment in AI capabilities and talent will partly offset these gains.

Key Risks

• Continued normalisation of the European automotive programme could affect Manufacturing revenue in Q3 FY27.
• Comviva seasonality remains a risk.