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Tech Mahindra: Good Operating Profit growth - Views on News from Equitymaster
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Tech Mahindra: Good Operating Profit growth
Feb 6, 2013

Tech Mahindra has announced its third quarter results for the financial year 2012-2013 (3QFY13). The company reported a 9.8% QoQ growth in consolidated sales and a 6.9% QoQ de-growth in net profits. Here is our analysis of the results.

Performance summary
  • Consolidated net sales grew by 9.8% QoQ. In terms of US dollar revenues, growth in sales was 10% QoQ. Growth at the top-line level was witnessed despite a de-growth in sequential revenue contribution from the top client, BT by 3.5% QoQ. Revenue from other customers grew at the rate of 13.3% QoQ.
  • EBITDA margin improved slightly by 0.3% QoQ to 21% at the end of 3QFY13. That was because Operating Expenditure (Cost of Services and Selling, General and Administrative Expenses) grew at a lower pace of 9.4% QoQ as compared to the increase in revenues. Growth in cost of services was even lesser at 8.8% QoQ compared to 11.6% QoQ growth in Selling, General & Administrative expenses. On an absolute basis, EBITDA grew by 11.4% QoQ.
  • Despite growth at top-line level, the bottom-line de-grew by 6.9% QoQ. That was because of lower contribution to the share of profits from its associate Mahindra Satyam. Contribution from the latter declined by a 71% QoQ. The decline in net profits would have been lower had the effective tax rate not increased from 12.4% in 2QFY13 to 24.5% in 3QFY13. Other Income growth of 147% QoQ arrested the decline in net profits to some extent.
  • The Company's employee base stood at 49,059 at the end of December 2012 as compared to 50,479 at the end of September 2012. Total headcount included 1,546 and 10,748 employees of newly acquired entities, Comviva and Hutchison Global Services
  • The total number of active clients increased from 126 at the end of 2QFY13 to 140 at the end of 3QFY13.

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