Tech Mahindra Q3 Results: Net profit jumps 93% YoY to ₹983 crore, revenue up 1.4% to ₹13,286 crore

Tech Mahindra, one of India’s leading IT services and consulting companies, announced its financial results for the third quarter of FY25 (Q3 FY25) on January 17. The results highlighted significant year-on-year (YoY) growth in net profit, reflecting the company’s strategic focus on expanding its market presence and improving operational efficiency. However, sequential trends presented a mixed bag, showcasing challenges in certain segments.

Key Financial Highlights

1. Net Profit Growth
   • Tech Mahindra reported a consolidated net profit of ₹983.2 crore in Q3 FY25, marking a substantial 92.63% YoY increase compared to ₹510.4 crore in the same quarter of the previous year.
   • On a quarter-on-quarter (QoQ) basis, net profit declined by 21% from ₹1,250.1 crore in Q2 FY25, reflecting a dip in sequential profitability.
2. Revenue Performance
   • The company’s revenue for the quarter stood at ₹13,286 crore, a modest 1.4% YoY increase compared to ₹13,102 crore in Q3 FY24.
   • Sequentially, revenue decreased marginally by 0.2% from ₹13,313 crore in Q2 FY25.
3. EBITDA Growth
   • Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) rose significantly to ₹1,809 crore, representing a 57.8% growth compared to ₹1,146.5 crore in Q2 FY25.
   • The EBITDA margin expansion demonstrates the company’s ability to optimize costs despite global challenges.

Segmental Analysis

1. BFSI Segment (Banking, Financial Services, and Insurance)
   • The BFSI segment showed strong performance, recording an 8.3% YoY growth and a 0.4% QoQ increase.
   • This growth reflects increased demand for digital transformation and financial technology services across global markets.
2. Manufacturing Sector
   • The manufacturing sector faced challenges, witnessing a 7.2% YoY decline and a 3.7% QoQ reduction.
   • This decline can be attributed to reduced client spending and macroeconomic pressures impacting global supply chains.

Operational Insights

1. Deal Wins and Market Expansion
   CEO and MD Mohit Joshi stated that Tech Mahindra achieved an improved rate of deal wins across key verticals and prioritized markets. This development aligns with the company’s long-term growth strategy.
   • The company secured significant deals in digital transformation, cloud solutions, and AI-driven services.
2. Headcount Reduction
   • Tech Mahindra’s total headcount reduced by 3,785 employees sequentially, bringing the workforce to 146,250 at the end of Q3 FY25.
   • The reduction reflects the company’s ongoing efforts to optimize resources and enhance productivity amid global economic uncertainties.
3. Cross-Currency Headwinds
   Despite challenges from cross-currency movements during the quarter, Tech Mahindra maintained consistent operating margin growth, highlighting robust cost-management practices.

Stock Market Reaction

Tech Mahindra shares ended the day on a bearish note, closing 1.78% lower at ₹1,657.65 on the NSE on January 17. The company’s market capitalization stood at ₹1,62,248.64 crore.

• The decline in share price may reflect investor concerns over the sequential drop in net profit and revenue.
• However, the YoY growth in profitability and EBITDA indicates underlying strength in the company’s operations.

Q2 FY25 Recap

To provide context, Tech Mahindra delivered an impressive performance in Q2 FY25:

• Net Profit: ₹1,250 crore, a 153% YoY increase.
• Revenue: ₹13,313 crore, reflecting a 3.5% YoY growth.
• The sequential growth in Q2 underscored the company’s ability to capitalize on favorable market conditions and drive higher client engagement.

Management Commentary

Mohit Joshi, CEO and MD, expressed optimism about the company’s growth trajectory despite global challenges.

• He stated, “We see an improved rate of deal wins in our key verticals and prioritized markets. This, coupled with consistent expansion in operating margins, despite cross-currency headwinds during the quarter, reaffirms that we are on track to achieve our long-term goals.”
• Joshi emphasized Tech Mahindra’s focus on driving innovation and operational efficiency to sustain long-term growth.

Industry Trends and Challenges

The IT services industry is navigating through a dynamic environment marked by evolving client demands, technological advancements, and macroeconomic uncertainties.

• Demand for Digital Solutions: Increasing adoption of cloud computing, AI, and data analytics is driving demand for IT services.
• Economic Uncertainty: Geopolitical tensions and inflationary pressures are influencing client spending patterns, impacting revenue growth.
• Talent Management: Companies are balancing cost optimization with investments in talent acquisition and upskilling to address the evolving needs of clients.

Future Outlook

Tech Mahindra is well-positioned to leverage its strengths in digital transformation, AI, and cloud solutions to capture emerging opportunities. Key focus areas include:

1. Expanding Market Share: The company aims to enhance its presence in high-growth verticals such as BFSI and telecommunications.
2. Enhancing Margins: Continued emphasis on operational efficiency and cost management will support margin expansion.
3. Innovation-Driven Growth: Investments in R&D and partnerships will enable the company to stay ahead in the competitive IT landscape.

Conclusion

Tech Mahindra’s Q3 FY25 results underscore its resilience in a challenging environment. While sequential trends highlight areas for improvement, the strong YoY growth in net profit and EBITDA reflects the company’s ability to navigate headwinds and deliver value to stakeholders.

As the company continues to execute its strategic initiatives, it remains a key player in the global IT services industry, poised for sustained growth and innovation.