Tech Mahindra posted a drop in quarterly profits as Covid-19 impacted its business and said that it is expecting headwinds going forward.
For the March-ended quarter, Tech Mahindra posted Rs 803 crore in net profits, a 29 per cent dip compared to Rs 1,132 crore posted in the same period last year. On a sequential basis, profits went down by 30 per cent to Rs 1,145 crore posted in the December-ended 2019 quarter.
For the whole year too profits were down. In FY 2020, profits were Rs 4,033 crore, a reduction of 6.1 per cent.
Tech Mahindra does not give any guidance but said that CP Gurnani, MD and CEO said that turbulence and uncertainty are parts of our lives. “While the demand traction seen through the first three quarters of fiscal 19-20 has reversed in Q4, we expect that the focus on digital transformation, remote working and network modernization will recover in the medium term.”
For the fiscal 2019-20, it had new deal wins of $3.7 billion.
Revenues for the March quarter was Rs 9,490.2 crore, an increase of 6.7 per cent when compared to Rs 8,892.3 crore it posted in the same period last year. On a sequential basis, revenues were down 1.7 per cent, compared to Rs 9,654.6 crore reported in December quarter.
For the whole FY20, revenues went up 6.1 per cent to Rs 36,867 crore from Rs 34,742 in FY19. In constant currency terms, this was a 5.6 per cent growth.
Gurnani told BusinessLine that going forward the company is looking at a new delivery model. “In the future, 25-30 per cent of the workforce will work from homes,” he said adding that currently, 100 per cent of its onsite workforce is WFH.
Tech Mahindra which employs around 125,000 people said that it has withdrawn all variable pay, bonus and incentive plans till there is clarity on new business plans. As of date, we have been busy with customers, the ecosystem and for next 6 months there will be no wage hike,” said Gurnani.
In the quarter, communication which contributes 40.8% of revenue, saw a sharp decline of 8.4% QoQ in dollar terms.
Tech Mahindra also took an impairment of goodwill worth Rs 217 crore. Goodwill impairment arises when there is deterioration in the capabilities of acquired assets to generate cash flows, and the fair value of the goodwill dips below its book value.
EBITDA came in at Rs 1,348 crore, down 13.8 per cent QoQ, while margins were 14.2 per cent, down 200 bps QoQ. This got a thumbs down from analysts. “The decline in EBIT margin is much higher than our forecast and means a weak exit rate considering further headwinds in Q1FY21 given the impact of Covid-19,” said Urmil Shah, Research Analyst and VP, IDBI Capital.
The company's board has proposed a final dividend of Rs 5 per share (100 percent) on the FV of Rs 5 in addition to the interim dividend of Rs 10 per share declared earlier. Earnings per share (EPS) was at Rs 45.9 for the year.
Tech Mahindra had $1.16 billion in cash and cash equivalents at the end of FY20.