Tech Mahindra's core margin will continue to improve in future: Manoj Bhat, CFO
July-September quarter has been a very satisfying quarter for Tech Mahindra as every vertical except manufacturing has grown at our end, says Manoj Bhat, CFO, Tech Mahindra.
July-September quarter has been a very satisfying quarter for Tech Mahindra as every vertical except manufacturing has grown at our end, says Manoj Bhat, Chief Financial Officer (CFO), Tech Mahindra. During an interview with Swati Khandelwal, Zee Business, Bhat also said, "we have a healthy funnel size of the deals that we are pursuing". Edited Excerpts:
Tech Mahindra has posted sound numbers in the September quarter. Tell us about the key triggers that led to a dollar revenue growth of 3.2% while the street was expecting a growth of about 1%.
It has been a satisfying quarter for us. If you have a look at the composition of the revenue growth then it has been across multiple verticals. Every vertical has performed well except the manufacturing vertical which had an impact of the auto sector and we have talked about in the past. If seen with the geographic perspective then there has been a broad-based growth. Thirdly, digital revenue has gone up to 39%. Positive momentum has been seen in all parameters. Similarly, when it comes to deal wins then we won deals of around Rs10,500-11,000 crore in this quarter, which is a record high for us as well. Thus, this quarter has been a satisfying quarter for us and we will try our best to maintain the momentum in the future.
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Tech Mahindra has beaten the street estimates in terms of margins by about 1%. What led to margin improvements and what are your expectation - on margins and dollar revenue growth - from the upcoming two-quarters of this fiscal?
We don't provide guidance but if we have a look at the size of the funnel - the deals that we are pursuing - then it is a healthy one and we are supposed to win them. But, the funnel size is quite encouraging. When it comes to margins then margin trajectory or our core margin will continue to improve. However, the deal wins may create a short-term cost as every new deal needs some investment to change the process and also for knowledge transfer and transition. So, these things may have some impact in the next two-quarters post that the margins will continue to grow at a steady pace. We are hoping that the revenue growth momentum will continue to grow in the next two quarters, however, margins will feel some pressure of transition.
How the acquisition of the BORN Group will help you in growing your revenues?
If we have a look at the acquisition then last year its revenue stood at around $45 million. And if seen in that perspective then it will have very less impact on our revenue. But, if I look at its capabilities and how it will be taken to the customers then it will bring influenced revenue to us, which will have more impact. The areas where the company will work includes commerce where it will help the retailers and manufacturers. Secondly, it works a lot in the area of digital strategy and users experience. Being a US-based company, it will increase our strength in the country. Thus, these benefits - in addition to BORN Groups own revenue - will increase our revenues in the future. We can see a lot of synergic potential in it.
Attrition rate is quite stable at 21%. How you have managed it and how it is likely to be in the recent future?
In a way, the attrition rate statistics are a reflection of the demand in the industry. And, if I have a look on one cut then it has been in a range of 17-21, which is a top-end of the range. Besides, if we have a look at the top-performer attrition then it has been very low. However, I feel that this attrition will remain at an elevated level because of the industry demand. For the purpose, various schemes are performed, training programmes are held, career-path is provided. But, it is good that attrition is happening due to the demand in the industry, however, its continuous efforts will be required to keep the best talent and retain and attract the best talent.