Thursday 07 November 2019

Tech Mahindra picks up the pace

LogoAfter a slow start to FY20 (see here), Mumbai-based offshore services major Tech Mahindra saw business momentum improve somewhat during the second quarter. Breaking from its Q1 walk into a trot, the company delivered constant currency revenues for the three months to 30th September of $1.29b, up c.5% yoy. EBITDA at $212m rose by 130 bps qoq but was down some 230bps compared to the same period in the prior year.

Digital services sales for the quarter grew by nearly 12% sequentially to just over $500m and now account for 39% of Tech Mahindra’s global turnover. There was good news too on the large deal front. During Q220 the company signed a multi-year agreement with AT&T to expand strategic collaboration accelerating AT&T’s IT Network Transformation, shared services modernisation and movement to the cloud. Europe, however, continued to prove a challenge with second quarter revenue in this region all but flat qoq and down some 4.7% yoy.

Following its acquisition of Mad*Pow three months ago, the company’s first buy in the creative agency space, the publication of its Q220 results was accompanied by the announcement of the purchase of New York-based digital content and production specialists BORN in a $95 million all-cash deal. The firm employs over 1,100 people in the US, London, Hong Kong, Singapore and India. Its clients include Google, Tata, Red Bull and TAG Heuer. Later to the acquisition party in this space than many of its SI rivals (see our report Another Year Another $1 Billion – The SI Creative Agency Spending Spree Continues for more details on this), Tech Mahindra now appears intent on making up for lost time.

Company management remains confident regarding the business outlook. Tech Mahindra still has a long way to go, however, if it is to approach the growth performances of IPP peer group rivals such as TCS, Infosys and HCL.

Posted by: Duncan Aitchison

Tags: results   offshore   acquisition   systemsintegration   digital  

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