Tech Mahindra — India's fifth largest software exporter behind TCS, Infosys, Wipro and HCL Tech — reported a slower pace of growth in the July-September period than its peers. This is because of its product and geography mix, CP Gurnani, CEO of the Pune-based IT major, told CNBC-TV18.
"From a geography mix (perspective), you know that we do our 49 percent from the US, whereas most of the peers are at about 70 percent... From a product mix point of view, certain sectors are now relatively slower... Overall, (given) my customer wins, my large deal wins continue to be 700 million-plus, I think it has been a good quarter," Gurnani said.
On Tuesday, Tech Mahindra reported dollar revenue of $1,638 million for the quarter that ended September, up 0.4 percent compared with the previous three months, missing Street estimates by a narrow margin.
Its margin — or the degree to which a business makes money — improved by 26 basis points to 11.3 percent.
Analysts in a CNBC-TV18 poll had estimated Tech Mahindra's quarterly revenue at $1,641.5 million and margin at 11.4 percent.
Gurnani also said that Tech Mahindra's profitability improved despite salary increases taken up during the quarter, and its free cash flow is one of the best in recent quarters.
#2QWithCNBCTV18 | An in-line set of #Q2FY23 numbers for @tech_mahindra. MD & CEO, CP Gurnani says certain sectors are relatively slower. Tells @_prashantnair, @_soniashenoy & @Nigel__DSouz that they saw increased profitability despite salary increases this quarter @Reematendulkar pic.twitter.com/3EmU7PVdL5
— CNBC-TV18 (@CNBCTV18News) November 2, 2022
Tech Mahindra's quarterly earnings report comes at a time when IT majors are struggling to defend their margins amid higher employee costs despite increased spending on technology across sectors.
Analysts have mixed views on the Tech Mahindra stock after the earnings announcement.
Nomura said the company's quarterly performance was broadly in line with estimates.
Tech Mahindra CFO Rohit Anand said the company's margin would depend on how the second half of the financial year pans out as it needs to monitor the impact of regions such as Europe.
The company will continue to work towards a margin benchmark of 14 percent by the quarter ending March 2023, he said.
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