Executive Vice-Chairman Vineet Nayyar said there was a 0.20 per cent dip in operating margin to 14.9 per cent due to a jump in visa costs and impact of acquisitions where the target companies work on a lower profitability.
The fifth-largest software exporter Tech Mahindra today reported a 7.2 per cent growth in June quarter net profit at Rs 676 crore, helped by forex gains flowing from depreciation of the rupee.
The Mahindra Group company's revenue rose 22.9 per cent to Rs 6,294 crore while pre-tax profit rose a marginal 0.8 per cent to Rs 936 crore.
It reported a forex gain of USD 14.7 million as against USD 11.7 million a year ago and forex losses of USD 25 million in the preceding quarter. Chief Financial Officer Milind Kulkarni attributed this to the falling rupee.
Executive Vice-Chairman Vineet Nayyar said there was a 0.20 per cent dip in operating margin to 14.9 per cent due to a jump in visa costs and impact of acquisitions where the target companies work on a lower profitability.
But he was quick to add that the company is satisfied with the margin figure and is working on various aspects to improve the same with multiple interventions.
Managing Director and Chief Executive C P Gurnani said the company, which hired only 392 in the quarter to take the count to 1.03 lakh, could drive up utilisation level to 73.6 per cent, from 71 per cent three years ago.
Gurnani added that the company is working to improve employee utilisation level to 78 per cent in the next four months.
Terming the results better than market estimate, analysts at brokerage Emkay said, "We continue to believe that the worst of margin performance is behind Tech Mahindra and expect margins to improve by 2-2.5 per cent over the next 4-5 quarters."
Nayyar said the company, which has done a slew of acquisitions including the tainted Satyam Computers, will continue with its inorganic growth strategy to fill gaps in its offerings.
Gurnani said companies take anywhere between six months to two years to integrate, which includes coming on par with the operational metrics.
On the geographical front, revenue from the Americas and Europe rose 5.6 per cent and 0.7 per cent, respectively, but the Middle-East and North Africa saw a decline of 7.4 per cent on a sequential basis.
Sector-wise, enterprise revenue jumped 6.4 per cent and manufacturing 4 per cent sequentially.
Much of the impact is due to the sluggishness in the telecom space, where the spurt in merger and acquisition activity has impacted client decision making, Gurnani said.
He was confident that these companies will start to deliver in the next few quarters.
He said the overall deal pipeline is "very good" and better than a year earlier.
Gurnani said the company is eyeing up to 11 per cent of its FY16 revenue to come from digital solutions.
The stock gained 1.59 per cent to close at Rs 519 on BSE as against a massive 1.96 per cent plunge in the benchmark Sensex.
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