Tech Mahindra's stock price has been underperforming other IT peers as the Street projected lower-than-expected earnings for the period ended June 30. The IT firm is likely to release its financial results today.
Tech Mahindra's revenue growth is likely to decline around 1 percent both in terms of dollar revenue as well as rupee revenue. The margins are expected to contract by around 200 bps.
Q1 net profit for Tech Mahindra is expected to decline by around 15 percent.
It is important to note here that this is a seasonally weak quarter when it comes to the IT companies and, for Tech Mahindra, this time the telecom revenues, which forms around 40-45 percent of the total revenue, might not fire up.
The margins are expected to contract because this has been the case with most of the IT companies; there have additional visa cost as well as the wage hikes that the company have taken and that is why we are working with a contraction of around 200 bps and consequently a profit decline of 15 percent.
In the FY20 guidance, the enterprise business will grow by around 8-10 percent and communications or telecom business will grow in low single digits.
The margins have been lower than the rest of the IT companies and there will be an additional pressure this quarter but what is the trajectory going forward for margins as well as deal wins will be something to watch out for.