Financial basis

Tech Mahindra likely to report 20% drop in earnings as margin drops 170 basis points

Tech Mahindra, India’s fifth-largest computer services exporter by market value, will release its financial results on Monday. Investors will be watching the margin and comments from the management of the Pune-based IT major closely.

Analysts in a CNBC-TV18 poll expect Tech Mahindra’s net profit for the April-June period to be Rs 1,200 crore, down 20.3% from the previous three months . They estimate that the company’s revenue will grow by 3.8% sequentially to reach Rs 12,571 crore.

They peg Tech Mahindra’s margin — a key measure of operating profitability indicating the difference between revenue from sales and expenses — at 11.5% for the quarter ended June. If that happened, it would mean a decline of 170 basis points from the previous three months.

Tech Mahindra’s financial results are expected at a time when IT companies are struggling to protect their margins due to high costs due to high levels of industry attrition. This even has companies from all industries spending a lot on technology.

Analysts see Tech Mahindra’s revenue in dollars increasing 1.3% on a quarterly basis and constant currency revenue – or revenue excluding currency fluctuations – increasing 2.5 to 3%.

Shares of Tech Mahindra fell by Rs 4.1 or 0.4% to end at Rs 1,028.4 each on BSE on Friday, ahead of the earnings announcement.