The Indian IT sector has experienced exponential growth, becoming a global leader in technology services and outsourcing. With a thriving ecosystem of companies like Tata Consultancy Services (TCS), Infosys, Wipro, and HCL Technologies, India remains at the forefront of innovation. The growth scope is vast, especially with the rise of technologies like Artificial Intelligence (AI), Machine Learning (ML), and Big Data.
These technologies are revolutionizing industries such as finance, healthcare, and e-commerce, enhancing automation, predictive analytics, and decision-making. Companies are increasingly adopting AI and ML to improve customer experiences, while Big Data enables businesses to leverage vast amounts of data for strategic insights. India’s IT sector continues to evolve, with a focus on advanced technologies, positioning itself as a global technology powerhouse.
Share Price
The shares of Tech Mahindra are currently trading at Rs. 1,667 up by 0.44% from its previous close of Rs. 1660.3. The shares of the company touched an intraday high of Rs. 1,687 as of January 20, 2025.
Q3 Results
Tech Mahindra reported a net profit of Rs 983 crore for Q3, a decline of 21.36% sequentially, primarily due to a high base in the previous quarter that included a one-time special income from the sale of assets. In Q2, the company posted a net profit of Rs 1,250 crore, driven by a property sale worth Rs 450.2 crore.
Revenue for Q3 was Rs 13,285 crore, down 0.21% from the previous quarter, missing analysts’ expectations of Rs 13,355 crore. Despite the decline in profit and revenue, the company’s EBIT margin grew by 60 basis points QoQ, reaching 10.2%, surpassing the expected 10%.
Citi’s Cautious Outlook
Citi has maintained a cautious stance on Tech Mahindra following its weaker-than-expected Q3 results. The brokerage lowered its price target marginally to Rs 1,440 and reiterated its ‘sell’ recommendation. Citi has reduced its FY25-27 earnings-per-share (EPS) estimates by 3-4%, citing high recovery expectations in a challenging sector backdrop. The brokerage anticipates that the company’s path to recovery will be difficult, with the sector facing persistent headwinds.
Nuvama’s Convoluted Recovery Path
Nuvama Institutional Equities highlighted that while Tech Mahindra has shown steady improvement over the last few quarters, the road ahead will be more challenging. The brokerage cut its FY25 and FY26 EPS estimates by 3.5% and 1%, respectively, due to the higher cross-currency impact in FY25. Nuvama emphasized that the company will need superior execution, cost control, and a favorable market cycle to sustain its performance. It maintained its ‘reduce’ call on the stock with a target price of Rs 1,400.
Morgan Stanley’s Stabilizing View
Morgan Stanley believes that the worst may be behind Tech Mahindra, given the stabilization in its revenue, particularly in key verticals. While the brokerage acknowledged a lower upside risk to margin improvement, it raised its price target to Rs 1,750. Morgan Stanley feels the stock is fairly valued at present and retained its ‘equal-weight’ rating. The firm remains cautiously optimistic about the company’s ongoing recovery efforts.
Nomura’s Optimistic Medium-Term Forecast
Nomura, on the other hand, remains optimistic about Tech Mahindra’s progress toward its medium-term goals. The brokerage expects revenue growth of 0.4-9.2% in dollar terms over FY25-27 and a margin expansion of 9.3-13.2%. Nomura sees strong deal pipelines and an ongoing business repair process as key drivers. With its positive outlook, Nomura retained its ‘buy’ rating and set a price target of Rs 1,900, expecting continued growth.
Future Goals
Tech Mahindra’s CEO, Mohit Joshi, unveiled a three-year turnaround plan in April last year, called Vision 2027, aimed at reversing the company’s slowing growth. The ambitious plan targets a 15% EBIT margin expansion and aims to achieve topline growth that outpaces the peer average among the top six IT services companies by FY27.
The strategy focuses on three key pillars: driving revenue growth, enhancing margin performance, and transforming the organization to ensure operational efficiency. Vision 2027 outlines Tech Mahindra’s commitment to growth, profitability, and sustainable business transformation over the next few years.
Written By: Dipangshu Kundu
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