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IT services company Tech Mahindra is likely to see muted revenue growth in the first quarter ended June 2024, impacted by seasonal weakness.
According to street estimates, revenue for the reporting period should decline 1.6 per cent year-on-year. Meanwhile, sequential revenue growth is seen anywhere between 0.3-0.9 per cent.
Deal wins for the quarter will continue to be muted due to macro uncertainty with TCV expectations pegged at $500 million.
Financial services group Nomura said in its quarterly preview, “We expect CC growth of 0.5 per cent quarter-on-quarter. Seasonal decline in Comviva business will be offset by growth in enterprise business. We expect adj. EBIT margins to expand by 100 bps quarter-on-quarter.”
Meanwhile, Motilal Oswal noted, “Revenue growth is expected to be muted at 0.4 per cent quarter-on-quarter CC; while the communications vertical has bottomed out, recovery could take longer. Deal wins are likely to be muted due to macro uncertainty. We expect a deals with TCV to the tune of $500 million in 1Q. Margin is likely to improve slightly by 30bp quarter-on-quarter, as the impact of cost-control efforts should start becoming visible.”
According to Motilal Oswal, weak growth is likely to keep margins under pressure. The outlook on margin and growth in the CME and BFS verticals will be the key monitorables.
Prabhudas Lilladher said, “We expect revenue growth (0.3 per cent CC quarter-on-quarter) to be impacted by seasonality in Comviva business, otherwise the enterprise business is expected to outpace the growth of the communication business. We expect modest recovery in margins by 30 bps quarter-on-quarter in Q1 due to missing operating leverage, which implies more heavy lifting for the rest of the year.”
Kotak Equities noted, “We expect quarterly financials to have a limited sway on stock performance in the near term with focus entirely on medium-targets laid by the CEO. We expect investor focus on: measures to improve to margins to 15 per cent by FY2027, health of telecom vertical, a segment in which many peers have announced mega deals, growth in keenly watched financial services vertical, health of deal pipeline and positioning in cost take-out deals, and any revenue leakage in existing accounts and positioning in vendor consolidation events.
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