The Hindu Business Line : Tech Mahindra Q2 net down 44%

Mumbai, Oct. 20 Tech Mahindra has recorded a 44 per cent fall in its second quarter consolidated net profit largely due to interest costs incurred on borrowings for acquiring Satyam Computer Services, coupled with declining revenues from its top customer BT and increased costs.

The Mumbai-headquartered company’s net profit for the quarter stood at Rs 169 crore, against Rs 302.8 crore in the corresponding period a year ago.

Revenues went down by 1.9 per cent to Rs 1,141.8 crore (Rs 1,164.8 crore).

In April, Tech Mahindra had agreed to take control of Satyam Computer Services, which was later rechristened Mahindra Satyam.

In order to finance the acquisition, the company had raised debt on which interest expense to the tune of Rs 84.3 crore was reported for the second quarter.

The company had a debt position of Rs 2,179 crore as of September 30. During the quarter gone by, the company refinanced Rs 1,150 crore of debt reducing the effective interest rate on its debt portfolio to 8.7 per cent a year.

Revenues from Tech Mahindra’s top client, BT Group Plc (which accounts for more than half of revenues) has been sliding for the last several quarters. Across the various deals that the Mahindra group company has with BT, there has been ‘pricing pressure’ of 5-10 per cent, Mr Vineet Nayyar, Vice-Chairman of Tech Mahindra, told Business Line. Moreover, volumes from the BT account have come down by seven per cent. “We are trying to counter-balance issues on the BT front by increasing productivity, improving utilisation and pushing more work offshore,” said Mr Nayyar. Non-BT revenues for Tech Mahindra have improved by eight per cent on a sequential basis.

Salary hikes

In the quarter gone by, the company’s overall expenditure went up by 10.6 per cent to Rs 883.26 crore (Rs 798 crore), largely on account of increase in employee costs and travel costs.

The company gave salary hikes of six per cent to its offshore employees and three per cent to its onshore employees, Mr Nayyar said.

The Tech Mahindra scrip was up by 0.37 per cent to close at Rs 941.4 on the BSE.