By Haripriya Suresh and Sai Ishwarbharath B
BENGALURU (Reuters) -Indian software services exporter Tech Mahindra expects a rise in revenue in the second half of the fiscal year, after growth in its banking and manufacturing verticals helped it beat estimates in the September quarter.
India’s $283-billion IT sector has been dealing with cautious client spending amid economic uncertainties, particularly in North America, its largest market. A proposed 25% U.S. tax on outsourcing payments and an H-1B visa crackdown are also expected to upend the industry’s playbook.
“Macro is stabilising and improving in parts but it’s still fragile…But we do see stabilisation and hopefully see growth in the second half of the year,” chief executive Mohit Joshi said at a press conference.
The company saw a 5.1% rise in revenue, to 139.95 billion rupees ($1.58 billion), beating analysts’ average estimate of 137.20 billion rupees, according to data compiled by LSEG.
Revenue from the Americas market, which accounts for nearly half of Tech Mahindra’s total, fell 2.7%, which Joshi attributed to challenging macroeconomic conditions. Revenue from Europe grew 5.5%.
Its largest segment, communications, saw a 2.2% revenue decline, but Joshi noted signs of recovery. Revenue from manufacturing grew 5.2%, and banking grew 6.2%.
“I believe last one year has been a low point for the [IT] industry, but we do expect growth in the future,” Joshi added.
Larger peers Tata Consultancy Services and HCLTech have been optimistic about their earnings outlook on the back of segment-specific growth.
Sagar Shetty, research analyst at StoxBox, said the company’s performance during the quarter was steady.
“Execution on large-deal ramp-ups and sustained margin expansion will be the key catalysts in the coming quarters,” he added.
Tech Mahindra’s net profit fell 4.4% to 11.95 billion rupees, missing average analyst estimates of 12.87 billion rupees.
It won new deals of $816 million during the quarter, against $809 million in the previous quarter and $603 million in the year-ago period.
($1 = 88.8010 Indian rupees)
(Reporting by Haripriya Suresh and Sai Ishwarbharath B, Editing by Harikrishnan Nair, Mrigank Dhaniwala and Vijay Kishore)
