Strong topline and bottom-line performance for TechM, high attrition but flat on QoQ basis (24%) | Tech Mahindra Q4 FY22 Conference Call Highlights4 min read
- Q4FY22: Revenue at USD 1608.1 mn; up 4.9% QoQ and up 21.0% YoY. Revenue growth up 5.4% QoQ at constant currency terms. EBITDA at USD 275.7 mn; down 0.3% QoQ, up 3.6% YoY. Margins at 17.2%. Profit after tax (PAT) at USD 198.5 mn; up 8.0 % QoQ and up 24.9% YoY. Free cash flow at $111 mn, conversion to PAT at 56.0%. Revenue at ₹ 12,116 crores; up 5.8% QoQ and up 24.5% YoY. EBITDA at ₹ 2,088 crores; up 1.4% QoQ, up 7.2% YoY. Consolidated PAT at ₹ 1,506 crores; up 10.0% QoQ and up 39.2% YoY.
- FY22: Revenue at USD 5,997.8 mn; up 17.3% YoY. EBITDA at USD 1,076.3 mn; up 16.3% YoY. Margins at 18.0%. Profit after tax (PAT) at USD 746.4 mn; up 24.9% YoY. Free cash flow at $ 595 mn, conversion to PAT at 79.7%. Revenue at ₹ 44,646 crores; up 17.9% YoY. EBITDA at ₹ 8,020 crores; up 17.1% YoY. Consolidated PAT at ₹ 5,566 crores; up 25.7% YoY. Total Dividend declared for FY22 is of ₹ 45/- per share. Free Cash flow of ₹ 4,417 Crore.
- Growth was led by by Technology (+32% YoY), BFSI (+28% YoY), CME (+21.7% YoY in CC terms). Management expects strong demand to continue going forward on the back of digital transformation driven by 5G technology and adoption of Cloud.
- Management expects verticals like Hi Tech and Manufacturing to enter the $1 bn league by the end of FY23. Amidst strong demand, TechM would aim to continue the intake of new deals to be $1+ bn per quarter.
- Post a rejig in the leadership team in Europe and America, these regions have witnessed healthy growth (+20.3%, +28.5% YoY respectively).
- Price increases, hiring of fresh talent, increased offshoring, better business mix and growth in revenue to act as levers for EBIT margins in FY23. H1FY23 EBIT margin might be under pressure on account of wage hikes (in June), visa cost (25-30 bps impact) and seasonality of Comviva. However, the Management aspires to achieve EBIT margins of around 15% by the end of FY23 (v/s. 14.6% for FY22) as price increases and hiring of fresh talent have a lag impact in terms of being margin accretive.
- Selling, general, and admin (SG&A) expenses are expected to witness an upward movement on the back of an increase in facility costs. EBIT saw a 5.5% QoQ decline on account of lower utilization, salary hikes, amortization of acquisition costs (80 bps impact), and increased hardware and software depreciation.
- After investing heavily on acquisitions in FY22, Company would focus on organic growth and integration of acquired assets in FY23.
- Tech Mahindra added 10,000+ freshers during FY 22 and expects to continue the same in FY 23 as a part of its plan to optimize employee costs. IT Attrition for the quarter stood at elevated level of 24%. However, was flat on a QoQ basis.
- The company has witnessed healthy net new deal wins of US$3.28 bn (up 48% YoY) in FY22.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell stocks or MF.
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