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Tech Mahindra: Satisfactory performance

Nov 23, 2012

Tech Mahindra has announced its second quarter results for the financial year 2012-2013 (2QFY13). The company reported a 5.7% QoQ growth in consolidated sales but a 12.5% QoQ de-growth in net profits. Here is our analysis of the results.

Performance summary
  • Consolidated net sales grew by 5.7% QoQ. In terms of US dollar revenues, growth in sales was 6.4% QoQ. The growth came on the back of 4.8% QoQ growth in non-BT (British Telecom) business in US dollar (USD) terms and one month of revenue from the Hutchison BPO acquisition. BT revenue, however, declined by 3.8% QoQ in USD terms.
  • EBITDA margin declined slightly by 0.7% QoQ to 20.7% at the end of 2QFY13. That was on account of increase in 'Cost of Services' by an identical percentage while 'Selling, General & Administration' expenses (both as percentage of sales) remained steady during the quarter.
  • Despite growth at topline level, the bottom line de-grew by 12.5% QoQ. That was because of a 21% QoQ lower contribution to the share of profits from its associate Mahindra Satyam along with an increase in negative other income to the tune of 269%. The fall in net profits would have been even higher had the effective tax rate not dropped from 23.7% in 1QFY13 to 12.4% in 2QFY13.
  • The Company's employee base stood at 50,479 at the end of September 2012 as compared to 40,630 at the end of June 2012. The increase was mainly because of the Hutchison BPO and Comviva acquisition completed during 2QFY13.
  • The total number of active clients dropped from 130 at the end of 1QFY13 to 126 at the end of 2QFY13.

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