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BENGALURU, July 27 (Reuters) – Shares of India’s Tech Mahindra (TEML.NS) fell as much as 5.3% on Thursday, their lowest since June 19, a day after the IT services firm posted a surprise drop in quarterly profit as challenging macroeconomic conditions forced clients to curb spending.
Tech Mahindra on Wednesday posted a 39% drop in its first-quarter profit to 6.93 billion rupees ($84.5 million), while analysts had expected the company’s profit to remain flat at 11.32 billion rupees.
Analysts flagged weakness in Tech Mahindra’s largest segment, communications, which contributes nearly 40% to its revenue, as telecom clients continue to ramp down on projects in a bid to cut costs.
Unlike rivals like HCL and TCS, the company’s new deal wins in the quarter fell to $359 million, a sequential drop of 39%, while trailing 12-month deal wins sank 25% from last year, Morgan Stanley analysts said in a note.
“While management alluded to the bottoming out of revenues from top clients, the near-term outlook remains weak,” they added.
The company’s margins on earnings before interest and tax (EBIT) declined to 6.8% from 11% a year earlier.
The average rating of 38 analysts tracking the stock is “hold”, and their median price target is 1,105 rupees, according to Refinitiv data.
($1 = 81.9825 Indian rupees)
Reporting by Kashish Tandon in Bengaluru; Editing by Sonia Cheema
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