Tech Mahindra (TECHM) Q4 11/12 earnings summary

Executive summary

• FY12 consolidated revenue rose 6.8% to ₹54,897M; PAT reached ₹10,955M, up 70%, including share of profit from the associate.

• Performance was steady amid volatile markets; the three-year turnaround at the associate improved growth and operating margins, while the proposed merger aimed to expand scale and service breadth.

Financial highlights

• Consolidated EBITDA was ₹10,176M, or 18.5% of revenue, versus ₹11,322M, or 22%, in FY11; higher employee costs and a changed business mix weighed on operating profit.

• Consolidated PAT before exceptional items and minority interest was ₹6,100M versus ₹7,458M; PAT after exceptional items and minority interest was ₹5,385M versus ₹7,438M.

• Standalone service revenue increased 5.6% to ₹52,430M; standalone PAT before exceptional items fell to ₹5,285M from ₹6,967M.

• Excluding the prior-year one-time system integration project revenue, FY12 consolidated revenue growth was 13.4%, versus reported growth of 6.8%.

Outlook and guidance

• FY13 IT spend growth was expected to be lower than in prior years; the CY12 global IT spending forecast had been cut to 2.5% from 3.7%.

• Mobility, smart devices, M2M, video delivery networks, cloud platforms, social media and analytics were identified as spending opportunities; emerging markets were expected to grow faster than developed markets.

• Telecom customers were pursuing cost optimization, vendor consolidation and next-generation platform transformation, creating outsourcing opportunities alongside delayed discretionary spending.