Informist, Monday, Jul. 14, 2025

By Rajesh Gajra

NEW DELHI – Analysts expect Tech Mahindra Ltd. to report flat revenue growth for the June quarter on a sequential basis. This is in line with the comments of the management in post-March quarter earnings press conference on Apr. 24 that client demand visibility "is a little bit muddy just now". The bottom line of the company is seen increasing in lower single digits aided by operating efficiencies and consequent slight improvement in margins.

Revenue growth for the June quarter will likely be hit by weakness of demand in the company's hi-tech, communications, and manufacturing verticals, and continued weakness in its business process outsourcing business. Tech Mahindra will detail its June quarter earnings Wednesday.

The information technology company is expected to report a consolidated net profit of INR 12.07 billion for the June quarter, up 3.4% sequentially and 42% on year, according to an average of estimates by 17 brokerages. The company's revenue from operations is seen nearly flat on quarter and up 3% on a year-on-year basis at INR 133.90 billion.

The highest net profit estimate of INR 14.93 billion is by HDFC Securities while the lowest estimate of INR 11.24 billion is by Nirmal Bang Equities. The revenue estimates range from a low of INR 133 billion by Motilal Oswal Financial Services to a high of INR 134.57 billion by Anand Rathi Share and Stock Brokers.

In constant currency terms, Tech Mahindra's consolidated revenue, according to an average of estimates by 11 brokerages, will likely be $1.56 billion, up marginally from $1.55 billion in the previous quarter. The earnings before interest and tax margin of the company will likely be 10.9%, up 40 basis points sequentially, according to an average of estimates by 10 brokerages. For the March quarter, the company had reported a sequential increase of 0.7% in consolidated revenue to INR 133.84 billion and a 19% rise in consolidated net profit to INR 11.67 billion.

Motilal Oswal Financial expects Tech Mahindra's revenue growth in constant currency terms to decline 1% sequentially due to a muted recovery in telecom and manufacturing verticals. According to the brokerage, these two verticals account for around 50% of the company's total revenue. "While the communications vertical has stabilised, recovery may take time," the brokerage said in its preview report.

"We forecast constant currency revenue decline due to weak hi-tech vertical and seasonal weakness in (the) BPO business," the institutional equities division of Kotak Securities said in its preview report. The brokerage said these "headwinds will more than offset the seasonal tailwind from Comviva, Tech Mahindra's subsidiary selling software and services to companies in the telecommunications sector." The brokerage forecasts net new deal wins of $750 million by Tech Mahindra in the June quarter, and expects these new deals to be won at higher margin.

The company's operating margin is seen improving 40 basis points sequentially "on continued cost rationalisation under project Fortius, an ongoing large-scale exercise to deploy operating levers and cut operational inefficiencies," Elara Securities (India) said in a preview note. There will, however, be margin headwinds from wage revisions, according to Kotak.

Weak revenue growth may limit upside to operating margin, Motilal Oswal Financial said. The brokerage forecasts the margin to go up 20 basis points "supported by lower subcontractor costs" and operating efficiencies.

After the announcement of Tech Mahindra's earnings for the June quarter, investors will focus on growth prospects in the company's financial services vertical, reasons for weakness in high-tech vertical and BPO business, and "health of telecom vertical, a segment in which many peers have announced megadeals," according to Kotak. The brokerage also expects investors to watch out for any revenue leakage in existing accounts and positioning in vendor consolidation events.

Tech Mahindra has 12 buy recommendations from analysts at an average target price of INR 1,739, two hold recommendations at an average target price of INR 1,632, and five sell calls at an average target price of INR 1,357.

At 0923 IST, shares of Tech Mahindra were down 1.1% at INR 1,584 on the National Stock Exchange. The company's shares have risen 9% since the closing price of INR 1,455.20 on Apr. 24, the day of the announcement of the March quarter earnings.

Following are the June quarter consolidated earnings estimates for Tech Mahindra based on reports from 17 brokerage firms in descending order of estimate of net profit:

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US$1 = INR 86.01

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Nishant Maher

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