Tech Mahindra issues weak Q1 revenue SOS
1 July 2015 4:35 AM IST
Tech Mahindra, India's fifth largest IT services exporter, on Monday warned that a seasonally weak mobility business and visa costs will impact its revenue in the April-June quarter, forcing the firm to resort to cost control measures and improving operational <g data-gr-id="34">levers</g>.
The firm said it expects the margins to improve only by the third quarter of the current fiscal, 2015-16. "Q1 FY16 has some headwinds and tailwinds, which could see a risk of marginal decline in both revenue and EBITDA margin on a sequential basis," the Mumbai-headquartered firm said in a regulatory filing.
"Seasonally weak mobility business will be a drag on Q1 (April-June of 2015-16) revenue and EBITDA. H1 B visa costs will be another drag on margins," the firm said. It added however that favourable currency movements could help both revenue and margins. A senior official employed with a top IT services firm said on the condition of anonymity that the first quarter is expected to be a weak one for almost all the IT firms. Tech Mahindra's anticipating an impact on its revenue and margins has been doing rounds in the market for some time and almost all the software services exporters are expected to be hit in April-June, he said. "Due to macroeconomic headwinds, several clients in the US and Europe have been approaching their IT spending with caution and they are not committing a very large amount in one go. This affects the IT firm's accounting as only the released amount can be put on the balance <g data-gr-id="28">sheets,</g> though it may be part of a large deal," the official said.
Tech Mahindra is the third company after Persistent Systems and KPIT Technologies to warn about its weak earnings in the first quarter of FY 2015-16. Tech Mahindra in its business update to investors said that investments in digital technologies, R&D, growth factories will continue in an accelerated way.
Reacting to the development, Tech Mahindra's stock declined by 8.73 per cent to Rs 476.35 per share on the BSE in the afternoon trade. The firm also warned that "organisation wide there is renewed focus on improving operational levers and cost control parameters, <g data-gr-id="25">however</g> the impact is expected to be visible only from Q3 FY'16 (October-December) onwards".
Scrip dives 7%; <g data-gr-id="54">mcap</g> plunges Rs 3,570 crore on warning
Shares of Tech Mahindra plunged over 7 per cent, <g data-gr-id="49">wiping-out</g> Rs 3,570 crore from its market valuation, as the company warned that a seasonally weak mobility business and visa costs will impact its revenue in the April-June quarter. Shares of the company tumbled 7.19 <g data-gr-id="50">per cent</g> to settle at Rs 484.35 on the BSE. During the day, it plunged 10.44 <g data-gr-id="51">per cent</g> to Rs 467.40-its 52-week low. On the NSE, shares fell sharply by 7.36 per cent to Rs 483.35. Following the weakness in the stock, the company’s market value declined by Rs 3,570.65 crore.
Next Story
