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Tech Mahindra’s growth prospects look strong led by deal wins, demand: Analysts

The growth prospects of Tech Mahindra Ltd remain strong supported by robust deal velocity, broad-based traction across verticals, and growth in communications, media and entertainment (CME) vertical led by 5G, analysts said.

Some of the key takeaways from an analysts’ meet included a positive outlook on the CME vertical led by 5G efforts, sustainability of improved large deal trajectory, and continued momentum in business process services (BPS), Elara Securities said in a note based on the company’s Analyst Meet.

“Tech Mahindra has increased its focus on account management of top 100 clients, resulting in deal total contract value trend improving 3x since FY18. The focus on sustaining large deal wins is evident as some recent large deal wins were its largest-ever wins in those segments (BPS, healthcare verticals). Large deal wins have become a consistent trend,” Elara Securities said.

Its deal pipeline in the manufacturing vertical has risen three times in the past year and comprises 30% of the overall pipeline (manufacturing vertical forms 16% of revenues). “Also, 50% of the manufacturing vertical is automotive and 50% of the vertical’s services composition is ER&D. Both are expected to drive growth,” Elara Securities said.

“Tech Mahindra expects increased investments in identified growth verticals (Healthcare and Lifesciences, Hitech), competencies (cloud, digital engineering, experience design, 5G) and investments in SaaS platforms (Factoreal, Yabx, Helthnxt) should support growth momentum. Tech Mahindra is augmenting growth momentum through programmatic M&A, focusing on cloud, AI, cyber security, 5G, digital engineering, digital transformation and customer experience, and data & analytics,” Emkay Research said.

The company has spent $640 million in M&A since 2019 and the acquired businesses reported a revenue CQGR of 8.7% (from pre-acquisition revenue run rate to Q2 FY22 run rate).

Tech Mahindra has increased freshers intake and is also focusing on tier-2 cities and near shore locations to tackle supply-side challenges. It hired 5,000 employees in the September quarter.

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