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Tech Mahindra: Extraordinary impact on profits

May 8, 2007

Tech Mahindra recently announced strong results for the fourth quarter and full year ended March 2007. For FY07, while revenues grew by 136% YoY, net profits have spiraled by 160% (excluding the one time payment to BT Global Services). Operating margins have expanded by 350 basis points (3.5%), mainly due decline in staff costs and selling expenses (both as percentage of sales). The performance for 4QFY07 has been equally good with topline and bottomline (excluding one time expense) growing by 14% QoQ and 18% QoQ respectively.

Consolidated financial performance: A snapshot…
>
(Rs m) 3QFY07 4QFY07 Change FY06 FY07 Change
Sales 7,698 8,745 13.6% 12,427 29,290 135.7%
Expenditure 5,625 6,527 16.0% 9,748 21,925 124.9%
Operating profit (EBDIT) 2,073 2,218 7.0% 2,679 7,365 174.9%
Operating profit margin (%) 26.9% 25.4%   21.6% 25.1%
Other income (32) 154   340 77 -77.3%
Depreciation 137 158 15.3% 397 515 29.6%
Interest 12 49 308.3% - 61  
Profit before tax 1,892 2,165 14.4% 2,621 6,866 161.9%
Tax 224 204 -8.9% 268 740 176.5%
Extraordinary items - (5,249)   - (5,249)  
Minority interest - (1)   - (1)  
Profit after tax/(loss) 1,668 (3,289) -297.2% 2,354 876 -62.8%
Net profit margin (%) 21.7% -37.6%   18.9% 3.0%  
No. of shares (m)         94.0  
Diluted earnings per share (Rs)*         9.3  
P/E ratio (x)*        169.0  

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