Tech Mahindra, a prominent player in the IT services sector, reported its Q2FY25 results on Saturday, revealing a remarkable increase in net profit and revenue. The consolidated net profit for the quarter ending in September 2024 doubled to Rs 1,250 crore, compared to Rs 493.9 crore in the same period last year. This impressive growth can be attributed significantly to special income from the sale of assets.

Financial Performance Overview

The company's revenue for the July-September quarter climbed by 3.49%, reaching Rs 13,313.2 crore, up from Rs 12,863.9 crore year-on-year. The report indicates a sequential growth as well, with net profit rising by 46.81% and revenue increasing by 2.36% compared to the previous quarter.

One of the key contributors to this growth was the other income, which included a notable gain on the sale of property worth Rs 450.2 crore. This transaction involved the sale of freehold land, associated buildings, and furniture, yielding a total consideration of Rs 535 crore, payable over four years with an interest rate of 8.2% per annum.

Strategic Initiatives and Project Fortius

Tech Mahindra’s CEO, Mohit Joshi, emphasized the company’s ongoing strategic improvement efforts amidst a generally soft IT services industry. The focus has been on enhancing client relationships and expanding the partner ecosystem, while also maintaining operational excellence through a structured initiative called Project Fortius. Launched in April, this three-year plan aims to achieve a 15% operating margin with an emphasis on organic growth.

In his statement, Joshi highlighted that the current quarter demonstrated consistent performance characterized by increased deal wins, revenue growth, cost optimization, and steady free cash flow generation. He affirmed the company's commitment to its capital allocation policy by announcing an interim dividend of Rs 15 per share.

Total Contract Value and Hiring Trends

The Total Contract Value (TCV), representing net new deal wins, amounted to $603 million for the second quarter of FY25. This figure indicates a healthy demand for Tech Mahindra's services and reflects its ongoing efforts to secure substantial contracts in a competitive marketplace.

Additionally, the company has been proactive in its hiring strategy, adding 6,653 employees during the quarter, bringing the total workforce to 154,273. This growth in employee count aligns with the company’s objective to invest in talent and enhance its capabilities in focus service lines, particularly in AI-first and cloud-first skill sets.

Outlook and Future Plans

While the CEO acknowledged potential volatility in the upcoming year due to the ongoing turnaround phase, he expressed confidence in the company's trajectory toward establishing a long-term and valuable franchise. He attributed this optimism to a high-caliber leadership team and a well-defined strategic plan.

Moreover, Joshi mentioned the company's commitment to fostering a high-performance culture driven by principles such as simplifying, clarifying, innovating, and maintaining a strong performance orientation. The focus on outcome-driven learning is designed to cultivate the skills necessary for success in an evolving industry landscape.

Market Reaction

On the stock market front, Tech Mahindra's shares closed at Rs 1,688 apiece on the BSE on Friday, reflecting a slight decline of 0.68% from the previous closing price. Despite this minor dip, the overall positive financial performance underscores the company's resilience and strategic initiatives in a challenging market.

Conclusion

Tech Mahindra’s Q2FY25 results demonstrate a robust recovery trajectory with significant gains in both net profit and revenue. The successful execution of Project Fortius and strategic initiatives positions the company well for future growth, despite prevailing market challenges. As Tech Mahindra continues to enhance its service offerings and strengthen client relationships, it remains committed to building a sustainable and high-performing organization in the IT services sector.

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