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Tech Mah: Lower assoc. income dampens show - Views on News from Equitymaster

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Tech Mah: Lower assoc. income dampens show
Aug 9, 2012

Tech Mahindra has announced its first quarter results for the financial year 2012-2013 (1QFY13). The company has reported a 8.8% QoQ growth in consolidated sales and an 11.9% QoQ growth in net profits. Here is our analysis of the results.

Performance summary
  • Consolidated net sales grew by 8.8% QoQ, mainly on the back of steep rupee depreciation during the quarter. In terms of US dollar revenues, growth in sales was flat. The growth in sales was 1% QoQ in constant currency terms during the quarter which came on the back of 1.5% QoQ growth in non-BT (British Telecom) business in constant currency terms.
  • Operating margins improved handsomely by around 4.5% QoQ to 21.4% as compared to 16.9% in the previous quarter (4QFY12). This was on account of lower cost of services as well as lower 'Selling, General & Administration' (both as percentage of sales) during the quarter.
  • Despite moderate growth at topline level and robust margin expansion at operating levels, bottom line grew by only 11.9% QoQ. This was mainly due to lower contribution to the share of profits from its associate Mahindra Satyam during the quarter. Also, higher interest costs impacted the performance at net level.
  • The company's employee base stood at 40,630 as at the end of June 2011, which means that total headcount number went down by 133 during the quarter. This was mainly due to a decline of 184 employees in the number of BPO professionals during the quarter. The headcount of software professionals also declined by 65 during the quarter. However, the company added 116 sales and support staffs during the quarter.
  • The total number of active clients remained flat at 130 during the quarter.

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