Tech Mahindra remains optimistic despite significant recent decline in profits

04 May 2020 3 min. read

Indian IT services and consulting firm Tech Mahindra has reported annual revenues of $5.1 billion, but last quarter profits have fallen by 29 percent.

Reporting season among the Indian IT services and consulting giants is drawing to close, granting observers some initial insights into the impact of the global coronavirus pandemic on the consulting sector – which according to one early estimate could see $30 billion shaved off the market this year, a 29 percent contraction. The latest to announce is Tech Mahindra, which posted annual revenues of $5.2 billion, but, incidentally, saw profits fall by 29 percent in Q4.

While HCL Technologies is due to report in a fortnight, four of the big five Indian IT consultancies have now released their 2020 financial year figures ending March, with the last quarter already showing the pinch. Wipro, the first out of the blocks, posted $8.1 billion for the year, but estimated a $15 million hit due to the pandemic to date, while Tata Consultancy Services, the biggest of the lot with revenues of $22 billion, also saw profits decline.

For Tech Mahindra, the 29 percent last quarter year-on-year decline in profits – one area in which the Indian IT firms have been attempting to make gains in in recent times – overshadowed a 5.6 percent rise in revenues at constant rates across the full year. Of concern is the slow-down in bookings, valued at $500 million for the quarter (TCS on the other and revealed its order book was the largest ever), while digital now contributes 44 percent of its total revenues.

Tech Mahindra remains optimistic despite significant recent decline in profits

“Covid-19 has brought an unprecedented change in business model for the IT industry,” said Tech Mahindra CEO CP Gurnani. “While the demand traction seen through the first three quarters of fiscal 19-20 has reversed in Q4, we expect that the focus on digital transformation, remote working, and network modernisation will recover in the medium term. The company has shown a strong growth for fiscal 20 and we remain committed to deliver sustainable solutions.”

Like its competitors, Tech Mahindra is also optimistic of a strong longer-term rebound. “Efficient operations, cost optimisation and delivery automation will be the key focus areas going into the next year,” commented Chief Financial Officer Manoj Bhat. “Our strong balance sheet combined with a focus on cash conservation will help us tide over the volatility in the near-term, as we look to emerge stronger and leaner to capture opportunities ahead.”

The figures altogether show little movement in the pecking order of the Indian IT giants over the past year. Infosys, the second largest (discounting Cognizant, which has annual revenues closing on $17 billion but is US headquartered), also recently released its 2020 financial report, with the firm pulling in $12.8 billion over the twelve months to April to be up by 8 percent. It too saw declines in Q4 net profit, but by less than 3 percent, and also remains optimistic long-term.

“While the immediate short-term will be challenging, looking ahead, we can see that there is a strong interest to consolidate with partners with high-quality and agile service delivery and strong financial resilience. I am confident we will emerge from this stronger,” said Infosys CEO Salil Parekh. “We feel well-positioned in terms of staying relevant to clients globally in helping them in their digital play, cloud virtualisation, automisation and cost-cutting initiatives.”