Key Highlights

• • Q4FY18 was a good quarter for Tech Mahindra with revenue growth driven by the enterprise business (up 4.8% QoQ), while margin expansion was led by higher utilisation, seasonal tailwind from mobility business, improved business mix and favourable currency. The telecom business (flattish in FY18) would have posted modest growth, had the company not exited certain low-yield deals.
• • Going ahead, while the robust momentum in the enterprise business will sustain (driven by digital), increased activity in 5G indicates that the telecom business will start firing sooner than expected (flattish growth since past three years). Operating margin (up 560bps in past four quarters) has scope of further improvement driven by automation, higher off shoring, better business mix and higher profitability of portfolio companies.
• • The merger with Satyam has created a formidable player making it the fifth-largest player in the Indian IT services sector (ex-Cognizant). This will enable Tech Mahindra to compete with biggies of the industry and vie for larger deals which could lead to improved traction for the merged entity. Generally clients are more comfortable with larger organizations having a good track record. The merger also helps to diversify its portfolio vertically as well as geographically.