- Tech Mahindra reported a year-on-year decline of 5.2% in its third quarter consolidated net profit of ₹1,297 crore amid a difficult macroeconomic environment.
- The company attributed the growth slowdown to factors such as supply-side pressure, hiring and turnover.
- Here are excerpts from a Q&A with CP Gurnani, MD and CEO of Tech Mahindra at a post-earnings conference.
IT services company Tech Mahindra on Monday reported a 5.2% year-on-year decline in its third-quarter net profit to ₹1,297 crore amid a difficult macroeconomic environment.
In rupee terms, the revenue of the IT company grew at an annualized rate of 19.9% to ₹13,735 crore while growing 4.6% sequentially. On a constant currency (CC) basis, sales grew 0.2% consecutively.
“The earnings decline is mainly caused by 2-3 factors – one of them is supply side pressure from last year to this year,” said Rohit Anand, the chief financial officer at Tech Mahindra. He added that turnover and hiring costs are high. “We had some accounting impact from last year to now based on acquisitions we made, some amortization of customer contracts and relationships is also pouring in,” said Anand.
Here are the excerpts from a Q&A with CP Gurnani, MD and CEO of Tech Mahindra at an earnings press conference:
How is the demand environment, given recession and slowdown fears around the world?
The current situation is quite dynamic. All I can say is that the overall macro environment — if we were to do a temperature check — isn’t uniform around the world, nor is it uniform across America or Europe.
So the best way to do this is across verticals and sub-verticals. Look at your customers, look at your relationships and analyze whether it is a B2B or B2C customer. And based on that, I personally believe that demand is high, but decisions are slow. The reasons why decisions are slow is very clear that they also need to look at their customer base, and at this stage discretionary spending decisions are relatively slow.
How does demand remain strong in a difficult macroeconomic environment? Is there much fear after tech giants like Amazon and Google lost manpower?
First of all, those are big giants and I’m not one to comment on them, but if I would look at them, there was a graph someone showed me that said, Someone hired 45,000 people in three years. If they laid off 1,500 people, why can’t we take that as a correction? I only relate to the data and data says my funnels are stronger than ever before.
My data shows that a client is talking to us about cost transformation, digital transformation, and business transformation – all three verticals of my service offering. The area where we’ve seen a slowdown is in discretionary spending, where certain B2C companies have hit a pause button.
How is the recruitment outlook at Tech Mahindra? Has dropout decreased?
I am very happy that the turnover has reached 17%. All in all, our occupancy rate has improved to 86.4% and I am very happy with that. In general, the environment we’re all in, I expect Tech Mahindra to be a more flexible organization and as a flexible organization, the budgeting, the hiring, the overall management of operational metrics — rather than waiting a quarter — I expect the leadership team to meet each month and respond to market trends.
I don’t think I want to hire anyone, I just want to assure you that Tech Mahindra would be skillful. We are taking feedback and improving our operational performance on a monthly basis rather than a quarterly basis.
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Tech Mahindra’s net profit in Q3 drops 5.2% YoY to ₹1,297 crore