Any current/future new fundraising through debt or equity?

The provided transcript from Tech Mahindra's April 27, 2023, call does not mention any plans for new fundraising through debt or equity. There is no specific discussion about issuing new shares or raising debt in the near future. The company emphasizes capital allocation by returning cash to shareholders, highlighting a dividend of Rs. 50 per share for FY23, an 11% increase from the previous year. The focus is on driving productivity, margin expansion, growth, and capital return rather than raising new funds. Management reassures investors about addressing macro challenges internally without i

Any current/future capex/capital investment/strategic investment?

Tech Mahindra is committed to continuing investments in technology and automation, including AI, predictive technologies, data sciences, cloud, and quantum computing. The company plans to double investments in people upskilling and technology to stay relevant during the economic downturn. Prioritization of investments in key markets like Japan and the Middle East is underway to target more large deals. Structural actions include portfolio synergy, operating rigor, and people transformation as part of execution strategy moving into the next fiscal. There is ongoing pyramid rationalizati

Future growth expectations in sales/revenue/volumes?

Tech Mahindra experienced a 13.7% constant currency revenue growth in FY23, closing the year at US$6.6 billion. The communication business grew 13.4%, and the enterprise segment grew 13.9% in constant currency terms. The company expects a cautious first half in FY24 with subdued growth due to macro challenges and slower decision-making cycles. A more favorable and robust pipeline and client discussions suggest a growth pickup in the second half of FY24. Tech Mahindra is optimistic about mid-to-long-term growth driven by cloud penetration, 5G adoption, AI, and data analytics. Large deal wins we

Future growth expectations in earnings/operating earnings/profits/EPS?

Growth in FY24 expected to be cautious in the first half, with improvement in the second half, driven by a more robust pipeline and favorable client discussions. Margin expansion targeted through multiple levers such as subcontractor cost reduction, improved offshoring, pyramid rationalization, and divestment of low-margin businesses. EBIT margins expected to improve irrespective of macro scenarios, with structural margin actions underway. Price increases from FY23 will have carry-forward impacts, with incremental pricing opportunities limited but under continuous pursuit. Headcount optimizati

Current/ Expected Orderbook/ Pending Orders?

The company sees a robust pipeline compared to last year, indicating healthy current orderbook status. Deal discussions are active with favorable and encouraging conversations across customer segments. Decision-making timelines are elongated with more approval cycles, causing some delays in final sign-offs, particularly impacting short-term order closures. First half of FY24 is expected to be subdued, with uncertainty around when postponed deals will close. The team is proactively engaging customers to position solutions aligned with their future needs to drive efficiency and business expansio

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Tech Mahindra LtdQ1 FY24IT - Software

Tech Mahindra Ltd Q1 FY24 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹1,573P/E: 28.9Market Cap: ₹1.4L CrSector: IT - Software

Management growth scorecard

Revenue

Category 3

Margin

Category 2

Fundraise

N/A

Order

N/A

Capex

Yes

1 of 3 growth signals are positive — mixed outlook.

Full analysis

Revenue guidance

Category 3

→Tech Mahindra experienced a 13.7% constant currency revenue growth in FY23, closing the year at US$6.6 billion.
→The communication business grew 13.4%, and the enterprise segment grew 13.9% in constant currency terms.
→The company expects a cautious first half in FY24 with subdued growth due to macro challenges and slower decision-making cycles.
→A more favorable and robust pipeline and client discussions suggest a growth pickup in the second half of FY24.
→Tech Mahindra is optimistic about mid-to-long-term growth driven by cloud penetration, 5G adoption, AI, and data analytics.
→Large deal wins were about $3 billion last year, with expectations to do better in the current year as client investments resume.
→Overall, the company is geared to capitalize on opportunities arising from current challenges and aims to continue growth momentum.

Margin guidance

Category 2

→Growth in FY24 expected to be cautious in the first half, with improvement in the second half, driven by a more robust pipeline and favorable client discussions.
→Margin expansion targeted through multiple levers such as subcontractor cost reduction, improved offshoring, pyramid rationalization, and divestment of low-margin businesses.
→EBIT margins expected to improve irrespective of macro scenarios, with structural margin actions underway.
→Price increases from FY23 will have carry-forward impacts, with incremental pricing opportunities limited but under continuous pursuit.
→Headcount optimization and increased internal fulfillment (from 46% to 71%) are expected to improve productivity and reduce costs.
→Return to shareholders remains strong; dividend payout for FY23 was Rs. 50 per share, up 11% YoY.
→Long-term outlook remains robust especially in Communication and 5G businesses, with sustained investment in technology and people transformation.

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Fundraise plans

→The provided transcript from Tech Mahindra's April 27, 2023, call does not mention any plans for new fundraising through debt or equity.
→There is no specific discussion about issuing new shares or raising debt in the near future.
→The company emphasizes capital allocation by returning cash to shareholders, highlighting a dividend of Rs. 50 per share for FY23, an 11% increase from the previous year.
→The focus is on driving productivity, margin expansion, growth, and capital return rather than raising new funds.
→Management reassures investors about addressing macro challenges internally without indicating external fundraising needs.

Order book

→The company sees a robust pipeline compared to last year, indicating healthy current orderbook status.
→Deal discussions are active with favorable and encouraging conversations across customer segments.
→Decision-making timelines are elongated with more approval cycles, causing some delays in final sign-offs, particularly impacting short-term order closures.
→First half of FY24 is expected to be subdued, with uncertainty around when postponed deals will close.
→The team is proactively engaging customers to position solutions aligned with their future needs to drive efficiency and business expansion.
→Pricing leverage is expected to be limited in FY24 compared to FY23.
→Despite short-term softness, longer-term client engagements, especially in Telecom (5G business nearing $1B run-rate), remain strong.
→Overall, management is optimistic about deal wins and revenue growth in the second half of FY24.

Capex plans

Yes

→Tech Mahindra is committed to continuing investments in technology and automation, including AI, predictive technologies, data sciences, cloud, and quantum computing.
→The company plans to double investments in people upskilling and technology to stay relevant during the economic downturn.
→Prioritization of investments in key markets like Japan and the Middle East is underway to target more large deals.
→Structural actions include portfolio synergy, operating rigor, and people transformation as part of execution strategy moving into the next fiscal.
→There is ongoing pyramid rationalization and improvement in offshoring rates projected to enhance margins.
→Although specific capex figures aren't disclosed, the focus is on long-term business process and system investments.
→Overall, Tech Mahindra is gearing up to leverage crisis opportunities by making strategic capital investments to support growth and productivity goals.

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