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Tech Mahindra: Income from Satyam comes handy
Feb 11, 2012

Tech Mahindra has announced its third quarter results for the financial year 2011-2012 (3QFY12). The company has reported an 8.4% QoQ growth in sales and a 14.8% QoQ growth in net profits. Here is our analysis of the results.

Performance summary
  • Net sales grew by 8.4% QoQ on the back of a good growth of 11.7% QoQ in the sales from non-BT (British Telecom) business during the quarter. For the nine months ended December 2011 (9MFY12), sales grew by only 4.9% year-on-year (YoY). The main reason for this tepid performance is that revenues of 9MFY11 included a one-time revenue of Rs 2,990 m on account of third party hardware and software purchased for a customer, which was not present during the current nine months period.
  • Operating margins improved by 0.9% QoQ to 16.2% as compared to 15.3% in the previous quarter (2QFY12). This was on account of lower selling, general and administration expenses (as a percentage of sales) during the quarter. However, for 9MFY12, margins declined by 2.5% YoY as compared to the same period last year.
  • Bottom line grew by 14.8% QoQ mainly due to higher contribution from the share of profits from its associate Mahindra Satyam and lower tax expenses during the quarter. For 9MFY12, net income increased by 43.7% YoY mainly due to huge gains on account of its associate Mahindra Satyam as compared to very small contribution seen during the same period last year.
  • The company's employee base stood at 42,746 as at the end of December 2011, which means that total headcount number went down by 911 during the quarter. 544 employees were added in BPO segment while there was a decline in the number of software professionals during the quarter. The total number of active clients increased by 2 to 130 during the quarter.

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