💰 Financial Performance

Revenue Growth by Segment

In FY25, total revenue grew 2% to INR 52,751 Cr. Segment performance: Banking, Financial Services and Insurance (BFSI) grew 4.3%; Retail, Transport and Logistics (RTL) grew 4.4%; Healthcare grew 3.7%. These were offset by a 5% decline in the Communication (CME) vertical and a 1.6% decline in Manufacturing.

Geographic Revenue Split

Tech Mahindra operates in over 90 countries with 90-95% of revenue derived from export of services. While specific regional percentages are not disclosed, the company maintains a higher level of geographical diversification compared to its IT peers.

Profitability Margins

Profit After Tax (PAT) margin was 9.1% in FY23. Net worth moderated to INR 27,147 Cr in FY24 from INR 28,395 Cr in FY23 due to lower PAT of INR 2,397 Cr and a dividend payout of INR 3,917 Cr. EBIT margin is targeted to reach 15% by FY27.

EBITDA Margin

PBILDT margin improved to 12.80% in FY25 from 9.47% in FY24. In Q1FY26, margins further expanded to 14.50% (up from 12.00% in Q1FY25) due to Project Fortius cost-saving initiatives and a better offshore delivery mix.

Capital Expenditure

Historical capital expenditure and acquisitions are funded internally through healthy cash flow from operations, which stood at INR 5,786 Cr in FY25 and INR 6,376 Cr in FY24. Specific planned CAPEX figures in INR Cr are not disclosed.

Credit Rating & Borrowing

The company maintains a 'Stable' outlook with a net-debt negative status. Total debt stood at INR 2,025 Cr as of March 31, 2025, against cash and liquid investments of INR 7,381 Cr. Fund-based limit utilization was less than 1% in FY25, indicating very low borrowing costs.

⚙️ Operational Drivers

Raw Materials

Human Capital (Employee Compensation) represents the primary cost, accounting for 56.47% of revenue in FY24 (INR 29,336 Cr). Other costs include software licenses and sub-contracting expenses.

Import Sources

Talent is sourced globally, with a significant workforce of 1,47,620 employees (as of June 2024) located in India and onsite locations across 90+ countries.

Key Suppliers

Not applicable as a service-based IT company; primary 'suppliers' are the global workforce and third-party software vendors like Microsoft, SAP, and AWS for service delivery.

Capacity Expansion

Current capacity is defined by a workforce of 1,47,620 employees. Expansion is focused on 'Must-Have Accounts' and the 'Turbocharge' program to increase revenue per account rather than physical plant capacity.

Raw Material Costs

Employee costs increased by 464 bps YoY to 56.47% of revenue in FY24 due to wage hikes and contract overruns. However, attrition eased to 10% in Q1FY25 from 13% in Q1FY24, helping stabilize these costs.

Manufacturing Efficiency

Utilization levels were noted as a headwind in Q1FY26. Efficiency is being driven by 'Project Fortius' which targets general and administrative expense optimization and integration synergies.

Logistics & Distribution

Not applicable as services are delivered digitally or onsite at client locations across 90+ countries.

📈 Strategic Growth

Expected Growth Rate

15%

Growth Strategy

Growth will be achieved through a 3-year roadmap: FY25 'Turnaround Phase' (grounding the new org, Turbocharge program), FY26 'Stabilization Phase' (full integration of portfolio companies), and FY27 'Reaping Returns' (improved structural mix and pyramid optimization).

Products & Services

Digital transformation, consulting, business re-engineering services, IT services (84% of revenue), and Business Process Outsourcing (BPO) (16% of revenue).

Brand Portfolio

Tech Mahindra, GenAI Studio (launched April 2023).

New Products/Services

Launched GenAI Studio in April 2023 and developed a Large Language Model (LLM) from scratch in 2024 to capture the growing demand for generative AI solutions.

Market Expansion

Focusing on 'Prioritized Markets' and 'Must-Have Accounts' (MHAs) to deepen penetration in BFSI, Healthcare, and RTL segments which grew between 3.7% and 4.4% in FY25.

Market Share & Ranking

Tech Mahindra is among the dominant IT players in India, particularly leading in the global communication vertical.

Strategic Alliances

The company utilizes strategic acquisitions to improve technological abilities, though large debt-funded acquisitions are monitored as a potential risk to the capital structure.

🌍 External Factors

Industry Trends

The industry is shifting toward Generative AI and cost-efficiency deals. Tech Mahindra is positioning itself by launching a GenAI studio and focusing on 'Project Fortius' to align with client demands for cost optimization.

Competitive Landscape

Faces intense competition from prominent IT players, resulting in pricing pressure and the need for continuous technological acquisitions.

Competitive Moat

Moat is built on deep domain expertise in the Communication vertical and a large workforce of 1.47 lakh employees. Sustainability is supported by 94-98% repeat business from a base of 1,100+ clients.

Macro Economic Sensitivity

Highly sensitive to recessionary pressures in the US and Europe, which led to project deferrals and lower deal wins (USD 359M in Q1FY24 vs USD 700-800M in previous quarters).

Consumer Behavior

Clients are increasingly seeking cost efficiency and AI-driven transformation, prompting TechM to shift from discretionary spending projects to cost-optimization contracts.

Geopolitical Risks

Exposed to protectionist measures and changes in immigration laws in various geographies, which can lead to higher H-1B visa denials and increased operational costs.

⚖️ Regulatory & Governance

Industry Regulations

Subject to international labor laws and immigration regulations (H-1B visas). Compliance is managed through a digitized contract management system.

Environmental Compliance

Maintains low GHG emissions and focuses on safety and mental health as part of its ESG framework.

Taxation Policy Impact

Not specifically disclosed, but the company maintains transparent shareholder practices and sustained dividend payouts (INR 3,842 Cr in FY25).

Legal Contingencies

The company has provided INR 1,230 Cr for contingencies related to ongoing investigations and legal proceedings involving the erstwhile Satyam Computer Services Limited.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the outcome of Satyam-related legal proceedings and the potential for large debt-funded acquisitions to weaken the gearing ratio beyond 0.50x.

Geographic Concentration Risk

While diversified across 90+ countries, the company remains heavily dependent on the US and European markets for its 90-95% export revenue.

Third Party Dependencies

Low supplier dependency; however, it relies on 1,100+ active clients, with the top 10 contributing 24.7% of revenue.

Technology Obsolescence Risk

High risk due to disruptive technology changes like GenAI; the company is mitigating this by being the first GSI to develop an LLM from scratch in 2024.

Credit & Counterparty Risk

Receivables quality is generally high given the 94% repeat business from established global clients, though a provision was created in Q1FY24 for a client bankruptcy.