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Tech Mahindra: Retendering of large contracts hurts - Views on News from Equitymaster
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  • Nov 22, 2011 - Tech Mahindra: Retendering of large contracts hurts

Tech Mahindra: Retendering of large contracts hurts
Nov 22, 2011

Tech Mahindra has announced its second quarter results for the financial year 2011-2012 (2QFY12). The company has reported a 3.2% QoQ growth in sales but a 13.1% QoQ decline in net profits. Here is our analysis of the results.

Performance summary
  • Net sales grew by 3.2% QoQ on the back of a good growth of 6.9% QoQ in the sales from non-BT (British Telecom) business during the quarter. The sales from BT business declined by 4.9% sequentially during the quarter. However, for the half year ended September 2011 (1HFY12), sales declined by 1.6% YoY (year-on-year). The main reason for this decline is revenues of 1HFY11 includes 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 half-year period.
  • Operating margins fell by 3.4% QoQ to 15.3% as compared to 18.7% in the previous quarter (1QFY12). This was on account of higher operating expenses (as a percentage of sales) during the quarter. For 1HFY12, margins declined by 1.5% YoY as compared to the same period last year.
  • Bottom line declined by 13.1% QoQ mainly due to the decline in the margins at operating levels. Net profits declined despite a higher contribution from the share of profits from its associate Mahindra Satyam during the quarter. However, for 1HFY12, net income increased by 75.3% YoY mainly due to gains on account of its associate Mahindra Satyam as compared to the losses seen during the same period last year.
  • The company's employee base stood at 43,657 as at the end of September 2011, which means that about 807 employees were added during the quarter. 2,071 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 remains at the same level of the previous quarter which is 128.

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