“So, I will just say that there are lot of things which are happening, lot of moving parts happening, lot of leadership change and all, so obviously weak set of numbers,” says Sandip Agarwal, Independent Market Expert.
I do not remember the last time we saw a margin profile of around sub-7% for Tech Mahindra. Last year or in FY21, the EBIT margin number used to be well above 16%, now 6.8.
Yes, so this is obviously a very weak set of numbers and as you rightly mentioned these things happen once in a decade type and we have seen this last quarter in one of the companies and then that company bounced back substantially in the margin and so the stock price.
So, I will just say that there are lot of things which are happening, lot of moving parts happening, lot of leadership change and all, so obviously weak set of numbers.
There is no respite on any front from that and no way they can be called one-offs.
But I would just say that this thing provides an opportunity once in a decade kind of situation where we should look at it in the perspective that this could be the worst and worst is probably behind.
So, with that perspective, one should look at the numbers. Any which way, expectations were not high but the numbers are actually much poorer than the expectations also.
But would you expect this to be a one-quarter issue because the weakness that we are seeing in high tech communication, it seems to be a bit more structural and not a one-quarter issue. Do you think it is a client, a segment-specific issue or it is going to be weak for Tech M before it gets better?
No, you are absolutely right. So, if you ask me from a perspective that will it be like other segments going forward, the answer is no. But will it recover from here? The answer is yes. So, what you are seeing today is probably worst in terms of all the parameters.
So, things will improve from here substantially. Also, I would request you to look at wherever in last three to five years this kind of numbers have come for any company, it has generally been one-quarter phenomenon only and from there generally we see sharp turnaround because you remember one thing that in IT, particularly software services, no one does business at this kind of margin.
These are very, very, very temporary in nature. I would not say even two-quarters. I would say these are generally one-quarter phenomenon. So, you will see a sharp recovery in margins and growth, I am not too much worried because I think the whole sector will start seeing some improvement now.
If you see the ISG data also, it also clearly suggests that things will improve from here. But I will not say that high-tech will grow like other verticals, but it will recover from here for sure.
That is also a bit surprising because there has been weakness when it comes to America for most of the company, thn their decline is limited to half a percent. It is rest of the world and Europe which has taken a sharper knock. Your take and also in terms of the deal wins because the deal win as far as Tech Mahindra is concerned has also come on the lower side because for rest of the companies whether TCS, whether Infosys, at least the pipeline looked strong, at least the deal wins were strong. For Tech Mahindra, the deal wins too are subpar.
No, absolutely. So, basically everything falls in place on both vertical and segment. So, what is happening is that if your communication and high tech is weak, obviously there is exposure to the geography.
There is geographical exposure also to it. So, basically, same reason impact both the things, business segments, geographical segment and vertical segments all three, so it cut across three.
So, you have to look at it from that perspective. So, I think the bigger challenge is that the vertical, which is communication and high tech that has not performed or there are challenges there, and once that starts showing some improvement, then you will obviously see the positive impact on other parameters.
So, you have to catch one parameter either you can say that US has been weak and within US then what has been weak or you can say comms and high tech has been weak and within that US has been weak so that is the way to look at it probably.
