India’s Tech Mahindra bets on 2025 after weak telecom segment weighs on Q3

MUMBAI/BENGALURU :Indian software services provider Tech Mahindra’s chief executive expects 2025 to be better than last year, after subdued demand in its mainstay telecom segment led to an earnings miss in the third quarter.

Companies in the $245-billion Indian IT sector have been grappling with clients cutting back on discretionary spending for several quarters amid uncertainties in the economy and higher borrowing costs.

CEO Mohit Joshi said much of the sector’s revenue is dependent on the macroeconomic situation and overall enterprise expenditures, which in the last six months, have not significantly changed.

“If we look at it by calendar-year perspective, 2023 was probably the worst, 2024 was an improvement over 2023, and we feel that 2025 will be an improvement over 2024,” Joshi told analysts.

The company’s revenue rose 1.4 per cent to 132.86 billion rupees ($1.53 billion) in the October-December period, while net profit surged 93 per cent to 9.83 billion rupees. Still, they missed analysts’ expectations.

Its order bookings rose both over the year earlier and sequentially to $745 million, a trend Joshi termed as sustainable and “not a flash in the pan”.

“The overall demand in the services industry has shown stabilisation, with some areas showing possibilities for improved spending,” Joshi said.

Sagar Shetty, research analyst at StoxBox, said improved deal ramp-ups during the quarter enabled the company to offset the seasonal furloughs.

“With an improved deal win momentum followed by its margin-accretive measures, the company is well-poised to achieve its turnaround targets,” he said.

Revenue from Tech Mahindra’s banking, financial services and insurance segment grew 8.3 per cent in the quarter, but telecom — which contributes a third of its revenue — declined 5.6 per cent.

Joshi called growth in BFSI and other segments such as media and lifesciences “healthy” and added that he sees “pockets of demand” in the markets of North America, Europe and Asia Pacific-Japan.

($1 = 86.5770 Indian rupees)

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