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Tech Mahindra Shares Plummet as Profits Take a Steep Dive
Updated: Jan 8
Tech Mahindra, an Indian IT services company, experienced a significant drop in its shares following the announcement of its largest profit decline in 16 years.
The stock fell by as much as 3.9%, marking its sixth consecutive session of losses.
The company reported a staggering 61.6% fall in net profit for the September quarter, the worst performance since March 2007. This decline was attributed to higher expenses and weak client spending. As a result, Tech Mahindra's margins on earnings before interest and tax contracted to 4.7% from 11.4% the previous year.
To streamline its operations and increase operational efficiency, Tech Mahindra revealed plans to absorb three of its units. This move is expected to reduce overheads and improve the company's overall performance.
Analysts have expressed concerns about the impact of portfolio restructuring and weak demand on Tech Mahindra's growth and margins in the second half of the year and fiscal year 2024. They also noted that the company's new deal wins decreased from $716 million to $640 million compared to the previous year.
The IT sector as a whole has been grappling with soft demand due to a challenging macroeconomic environment. This has led to reduced spending and forecasts of a decline in key IT services revenue by companies like Wipro.
Tech Mahindra's shares plummeted after the company reported its largest profit drop in 16 years.
The company's net profit for the September quarter fell by 61.6%, the worst performance since March 2007.
Higher expenses and weak client spending were cited as the main factors contributing to the decline.
Source: REUTERS