Tech Mahindra Q2 Review - Solid Growth, But Stretched Metrics Adds To The Risks: Motilal Oswal

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Motilal Oswal Report

Tech Mahindra Ltd.'s U.S. dollar revenue growth of 7.2% QoQ constant currency in Q2 FY22 was above our estimate, led by broad based growth within both communications/enterprise (up 7.7%/up 7% QoQ constant currency).

New deal wins fell 8% QoQ to $750 million, but stayed ahead of past trends. The management continues to see sustained traction in deal win momentum.

Ebit margin was flat QoQ (40 basis points above our estimate) in Q2 FY22, with the benefit from operating leverage offset by utilisation and subcontracting cost.

Tech Mahindra had a record high net addition of ~15,000 employees in Q2 FY22. While utilisation dipped 100 bps, it is still at the highest level in our IT coverage (89% excluding trainees).

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