When the Q1 results came in, IT services firm Tech Mahindra, saw its share price plummet after it posted a challenging beginning to the fiscal year. Tech Mahindra is an IT solutions provider that operates under the Mahindra Group’s umbrella, which seeks to empower the connected world, including enterprises, associates, and society by rising together.
Image Source: Tech Mahindra
Tech Mahindra’s Vision and Mission
Tech Mahindra is an IT consulting and systems integration that has a presence in over 90 countries and provides solutions with digital expertise and sound industry-strength processes. Their strategic goals include transforming the company into a nimble, customer-oriented, and purposeful organization that provides high-quality technology solutions to its clients. They strongly believe that technology can change the fortunes of communities globally and they major work on availability and sustainability, education, and individual social responsibility.
Revenue and EBITDA Margin
The consolidated revenues for the year were around ₹13,005 crores. This means an increase of only 1.0% has no quarter-on-quarter (QoQ) growth meaning its 1.2% year-on-year (YoY) decline. Tech Mahindra’s consolidated net profit increased to 28.8% from last quarter and has reached up to ₹851 crores. On a YoY basis, the profit has risen by 23.0%. The EPS value reached ₹9.62. The EBITDA (earnings before interest, taxes, depreciation, and amortization) margin climbed to 12.0%, a QoQ increase of 11 bps and a YoY change of 190 bps.
Communication Vertical Challenges
Seasonality affected Tech Mahindra, particularly in its Comviva business division, which was a limiting factor in revenue growth. This segment’s performance was responsible for low Q1 numbers as mentioned earlier. However, the overall improvement remained limited, even when taking into account the progress in the enterprise segment.
Market Impact
The market reacted sharply to the Q1 numbers announced by Tech Mahindra, cutting the stock by 6.67% drop in the company’s share price. Market players focused their attention on the results, evaluating potential problems in the short term and analyzing the strategic perspective.
Comviva Segment
Comviva, a major component of Tech Mahindra group, emerges as a leading player in scripting the communication revolution. The company was established in 1999 under the name Bharti Telesoft Limited in New Delhi, India. It has, however, undergone different stages of development over the years such as management buyouts and the acquisition of CellCloud Technologies Limited. Some of the milestones achieved by Comviva include the company being the first to launch an electronic top-up solution referred to as “PreTUPS”.
Tech Mahindra bought a 51% controlling stake in Comviva in 2012 for ₹260 crore /SMG. The end-to-end merger of both companies formed a new company called Mahindra Comviva which offered mobile value-added services (VAS), money, and payment. Some of the areas of Comviva’s operation include payment solutions, service solutions, and especially value-added solutions. They include mobile wallets and real-time cross-border payments known as “Terrapay among others.
Conclusion
Although Q1 results may not have been what some investors expected, Tech Mahindra’s leadership continues to be focused on market cycles and possible approaches to creating value for shareholders in the following quarters. While the company has recently suffered from the decline of Q1 results, Comviva stands out as an essential part of the mobile technology market, determining its further development.
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