Tech Mahindra Q1 results: Profit slumps 39% to Rs 693 crore, misses expectations

The consolidated net profit for the quarter ending June 30 stood at Rs 693 crore, missing analyst expectations amid challenging macroeconomic conditions and spending cuts by clients. Leading IT company Tech Mahindra reported a 39 per cent slump in first-quarter profit on Wednesday as challenging macroeconomic conditions led clients to cut back on spending.
The consolidated net profit for the quarter ending June 30 stood at Rs 693 crore, missing analyst expectations of Rs 1,132 crore.
Indian IT firms have been experiencing subdued results as clients tighten spending due to fears of a recession in key markets like the US and Europe.
Tech Mahindra's largest segment, communications, faced weakness as telecom clients reduced project spending to control costs. The company's new deal wins also witnessed a significant drop, falling to $359 million from $802 million in the previous year. The challenging quarter impacted revenue growth, which saw headwinds affecting profitability.
Although revenue from operations increased by 3.5 per cent to Rs 13,159 crore, it fell short of the estimated Rs 13,495 crore by analysts.
The company's earnings before interest and tax (EBIT) margin fell to 6.8 per cent from 11 per cent due to a 9.4 per cent rise in employee benefit expenses, aligning with expectations of a contraction in the EBIT margin due to wage hikes.
"This quarter was a challenging one for us as revenue growth faced strong headwinds and that had an impact on profitability," said Chief Financial Officer Rohit Anand.
Shares of Tech Mahindra closed down 1.15 per cent ahead of the results, making it the worst-performing stock among IT peers, with a decline of 1.40 per cent since bigger rival TCS announced its results on July 12.
The challenging quarter highlights the impact of the uncertain demand environment in the IT sector, and Tech Mahindra's results are in line with warnings from other major IT players like Tata Consultancy Services and Infosys.