DQ Top 20:#7 Tech Mahindra

The company calls FY14 a landmark year as it saw the creation of an integrated entity through one of the largest mergers in India. The synergized operations clearly expanded its reach and upped its stature and hence it stormed into the ivy league of the Top 10 IT companies in India.

Its one big jigsaw puzzle the company has done, given the intricacies and the complexities in the whole merger deal. Given this backdrop, the company began the fiscal and completed the merger in Q1 FY14. In Q2 it forayed into the new area of network services and signed the Base Telecom deal. This acted as a reference and over the year it saw a steady closure of new large deals in both the telecom and enterprise division. On the non-organic front, the company continues to make select bets and investments.

Overall the company terms that it had a reasonably successful year of growth and hope to continue the momentum. On the macro front, the US business grew at a faster than anticipated pace and in the second half of 2013 led by buoyant domestic demand, robust inventory, accumulation, and strong export growth. However, risk to growth in 2014 could be from geopolitical tensions in the Ukraine region and the capabilities to merge with MES and in select markets through its agreement with BASF IT.

If we look at the performance by verticals-telecom and manufacturing led the FY14 growth with 22% and 18% respectively. It signed on one large deal in manufacturing during the quarter and it continues to gain traction in the marketplace.

As we look at the enterprise side of things, from about 8% last year it stood at 14% at the end of the fiscal year. If one looks at pure numbers on the enterprise side of the business, on a year on year basis it was a good spike indeed. And manufacturing as a vertical also worked out very well for the company. It also saw good traction in BFSI, technology media entertainment and its retail sector has done extremely well with 22% year over year growth. So, clearly on the enterprise side, the company is seeing good momentum but it need to further accelerate and significantly expand this slice of the pie so that revenues across segments becomes more homogenous.

Meanwhile the total associate strength went up from 83,000 to 90,000. The good thing is the company has around `3,600 crore, which is equivalent to $600 mn in cash, and cash equivalents in its books as of year ended March 2014. This is in spite of repaying about `800 crore of debt during the year.

According to analysts, the FY15 outlook for the company remains by and large positive. The company believes that its own deal pipeline compared to the same time previous year is showing at least 30% to 40% higher strength than what it had exactly a year ago. In general the company is in a better shape as compared to last year. But a lot depends on how much customers are going to spend additionally in FY15 and much of growth hinges on this and moreover as we further drill down, its dependence on top 10 clients must also come down. So, clearly it banked on the big deals and the repeat business. But as we move along, it needs short term strategic outsourcing deals that will bring some degree insulation when long-term contracts come for renewal and gets shrunk on renewal.

Tech Mahindra won the Best ICT Delivery Partner-Land Transport Excellence Award 2014. The award recognizes industry partners and individuals who have played a pivotal role in developing and transforming Singapore's transport system. Netgear honoured Tech Mahindra BSG (vCustomer) with ‘Best Supplier Award'.