Tech Mahindra, one of the leading IT companies in India, has recently reported its Q2 FY25 financial results, which have sent shockwaves through the stock market. The company's net profit surged by an impressive 153% year-over-year (YoY) to 1,250 crore, while revenue increased by 3.5% YoY to 13,313 crore. This remarkable performance has placed Tech Mahindra shares in the spotlight, making them a stock to watch for investors and analysts alike.
The IT major's consolidated net profit jumped 46.81% to 1,250.1 crore on a 2.36% rise in revenue from operations to 13,313.2 crore in Q2 FY25 compared to Q1 FY25. On a YoY basis, Tech Mahindra's net profit soared by 153.10%, while revenue grew by 3.49% in Q2 FY25.
In terms of dollar terms, revenue stood at $1,589 million in Q2 FY25, registering a growth of 1.9% QoQ and 2.2% YoY. In constant currency terms, revenue grew by 0.7% QoQ and up by 1.2% YoY. Profit after tax was at $149 million, up 46.1% QoQ and up 150.7% YoY.
The company's EBITDA stood at 1,750 crore in the quarter ended September 30, 2024, up 11.9% QoQ and up 63.2% YoY. EBITDA margin came in at 13.1% in Q2 FY25, up 110 bps QoQ and 480 bps YoY.
Tech Mahindra secured net new deals worth $603 million in Q2 FY25 as against $534 million in Q1 FY25 and $640 million reported in Q2 FY24. The total headcount was at 1,54,273, registering a 4.50% QoQ increase and a 2.43% YoY increase.
The IT attrition rate for the last twelve months (LTM) was 10.6%, an increase from 10.1% in Q1 FY25 and a decrease from 11.4% in Q2 FY24. Cash and cash equivalents were at 6,566 crore as of September 30, 2024, compared with 8,055.2 crore as of June 30, 2024, and 6,514.8 crore as of September 30, 2023.
Mohit Joshi, Chief Executive Officer and Managing Director of Tech Mahindra, highlighted the company's strategic improvement efforts despite the soft overall IT services industry. He emphasized strengthening client relationships and expanding the partner ecosystem while maintaining operational excellence through project Fortius, which has resulted in an expansion of margins for the third sequential quarter.
Rohit Anand, Chief Financial Officer of Tech Mahindra, noted that the company has seen consistent performance around increasing deal wins, revenue growth, cost optimization, and steady free cash flow generation. He also mentioned that in line with their capital allocation policy, the board has declared an interim dividend of 15 per share.
The interim dividend declared by Tech Mahindra is set to yield approximately 2.37%. The record date for determining eligibility of shareholders has been fixed as November 1, 2024, with the dividend to be paid on or before November 17, 2024.
Tech Mahindra's focus on leveraging next-generation technologies such as 5G, blockchain, cybersecurity, artificial intelligence, and more, is enabling end-to-end digital transformation for global customers. The company's strategic partnerships and investments in these technologies are expected to drive future growth and profitability.
In constant currency terms, Tech Mahindra's revenue was up 0.7% QoQ and 1.2% YoY. The communications vertical experienced a YoY decline of 1.7%, although it showed a sequential growth of 2.7%. The BFSI sector grew by 4.5% YoY and 2.4% quarter-on-quarter. Revenues from the technology, media, and entertainment vertical rose by 2.4%.
Tech Mahindra's IT attrition rate increased to 11% in Q2 compared to 10% in the previous quarter. The total headcount rose by 4.5% QoQ to 154,273. The company's operating margins for the quarter stood at 9.6%, reflecting an increase of 1.1% compared to the previous quarter.
The company's financial highlights for Q2 FY25 include revenue of $1,589 million (up 1.9% QoQ and 2.2% YoY), EBITDA of $209 million (up 11.3% QoQ and 61.4% YoY), and profit after tax of $149 million (up 46.1% QoQ and 150.7% YoY).
Tech Mahindra's strategic partnership with Mahindra & Mahindra (M&M) aims to boost generative AI (gen AI) adoption and lead digital transformation for various entities of M&M. The partnership involves leveraging AI and machine learning technologies to enhance engineering, supply chain, pre-sales, and after-sales services for M&M.
Tech Mahindra has also announced the launch of TechM VerifAI, a comprehensive solution for validating and verifying the outcomes of Artificial Intelligence (AI) and GenAI projects. This solution will help enterprises validate the end-to-end lifecycle of AI-based projects, enabling them to scale their AI initiatives speedily.
In conclusion, Tech Mahindra's Q2 FY25 financial results demonstrate strong growth and resilience in the face of industry challenges. The company's strategic initiatives, technological advancements, and consistent performance make it an attractive investment opportunity for both short-term and long-term investors.
