Tech Mahindra to focus more on deals from healthcare, other verticals

Indian IT services company Tech Mahindra would focus more on deals from Healthcare, Manufacturing, Banking, Financial Services, and Insurance, among other verticals, the company’s Chief People Officer announced.

Harshvendra Soin, the CPO and the head of marketing at the IT company told analysts, “At Tech Mahindra, as we are increasing our focus across BFSI, healthcare, manufacturing and retail sectors in geographies like the USA, we are investing in quantum computing, cybersecurity and AI. We will also continue to invest in learning development of employees to create a future-proof and resilient talent pool.”

Deals from the Communications, Media, and Entertainment (CME) constitute a major part of the IT company’s deal book. On an average, around 40 per cent of the company’s deals have been from the CME sector. But, as the CPO stated, the company plans on pivoting to other sectors as well.

Moreover, CEO designate Mohit Joshi is expected to spearhead this pivot as he was the Head of BFSI, Healthcare, and Life Sciences at Infosys.

The company posted a disappointing set of numbers for Q1 FY 2023-24, far below analyst estimates. The net profit for the June ended quarter was at Rs 692.5 crore, down over 38 per cent.

The revenue for the first quarter stood at Rs 13,159 crore. The earnings before interest and taxes (EBIT) were down 36.5 per cent on a year-on-year basis. The EBIT stood at Rs 891 crore. The EBIT margin was at 6.8 per cent, down over 400 basis points compared to 11 per cent of the year ago quarter.

A major reason for this drag was the slowdown in the CME deal flow. For Tech Mahindra, CME witnessed a 8.2 per cent decline in revenue YoY.

Joshi himself acknowledged the challenges that lie ahead for him in the Q1 FY24 earnings call.

The CEO designate also acknowledged the challenge and said during the earnings call, “We’ve had a challenging set of results. But going forward, in the time that I’ve spent with the company, I’m very confident about our medium and long-term fortunes. We will work to build a strong and robust platform as CP and I work over the transition over the next few months.”

Brokerage houses remain optimistic on Joshi’s appointment but believe that his interventions might take some time to come into effect.

Kotak Institutional Equities said in a note, “The full impact of the interventions of Mohit Joshi will be visible by FY2025E. We forecast c/c revenue growth of 8.3 per cent and EBIT margin expansion by 300 bps in FY2025E.” Business Today