InfoTech industry slowdown virus infects TechM; Q4 profit crashes by 31% to Rs588 cr

Fifth biggest software exporter Tech Mahindra on Friday reported a 31.2 per cent dip in its March quarter net at Rs 588 crore, hurt by compression in margins on currency volatilities and change in business landscape.

The Mahindra group company posted a 6 per cent dip in its FY17 post tax profit at Rs 2,812.9 crore.

The overall revenues grew to Rs 7,495 crore for January-March period, up from the year-ago's Rs 6,883 crore. Its chief executive and managing director C P Gurnani said despite the revenue growth, profitability is a concern and the management will be focusing more on it in FY18.

During the March quarter, it suffered reverses of $20 million for exiting a communications contract of its acquired company LCC, while another $15 million was on account of "reprofiling" which were explained as reverses due to renegotiating of contracts by cash-strapped clients. It hinted the impact reprofiling will continue for two quarters more.

These two factors, coupled with currency volatilities which saw an appreciation in the rupee, dragged the operating profit down to Rs 821.3 crore from the year-ago's Rs 1,056.7 crore, and the operating profit margin to 12 per cent from the 16 per cent level of the year-ago period.

Gurnani said the company will be using multiple levers to up the profitability and said that the deal pipeline is better now than what it was in the year-ago period. Apart from profitability, it will also invest on re-skilling its over 1.17 lakh employees because of the changing industry landscape, he said, declining to give a number on the same. It added a net of 600 employees during the reporting quarter. Amid concerns over massive layoffs in the IT industry, Gurnani said the company shed almost 1,000 employees in its BPO arm.