Tech Mahindra delivered a modest set of numbers in the June quarter — a seasonally strong period for IT players — though the company’s financials were mostly in line with market expectations.

In the first quarter, Tech Mahindra’s revenues fell 1.6 per cent sequentially in dollar terms (up 0.3 per cent in constant currency). TCS (1.6 per cent), Infosys (0.9 per cent) and HCL Technologies (0.8 per cent) had reported higher revenue growth during the first quarter, while Wipro’s declined by 1.7 per cent.

EBIT (earnings before interest and tax) margin declined to 12.9 per cent (from 13.7 per cent in March) for Tech Mahindra.

The company’s largest vertical, communications (39.6 per cent of revenues), saw revenues decline. But manufacturing and BFSI segments expanded during the June quarter. While three customers were added in the $20 million bucket, there was no addition in the $10 million category.

Barring TCS, all other top-tier IT companies witnessed growth that was narrowly led and not broad-based across segments in the June quarter.

Attrition has been rising steadily for Tech Mahindra over the last three quarters and was at 19 per cent during the period.

Discount justified

Trade body Nasscom’s has projected a growth rate of 7-9 per cent in FY19 for the IT industry. With a modest performance in the June quarter, Tech Mahindra will have to up the revenue momentum in the second half to reach even the mid-point of the industry’s range. For the foreseeable future, it may continue to trade at a significant valuation discount to TCS and Infosys.

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