Tech Mahindra Has Given Signals For Lower Earnings In Q1FY16
Today, Tech mahindra announced in its business update, that the company in Q1FY16 has some headwinds and tailwinds which could see a risk of marginal decline in both revenue and EBITDA margin on a sequential basis. The reasons behind it, as seasonally weak mobility business will be drag on Q1 revenues and EBITDA, also H1B visa costs will be another drag on margins.
Shares of Tech Mahindra sharply slipped more than 8 per cent today as the firm warned about fall in Q1Fy16 earnings. It has also announced that FY16 organic communication business growth could remain subdued due to delayed decision making. Tech Mahindra has already disappointed with its numbers in the quarter ended March 2015 .
Tech Mahindra stated that, the deal pipeline remains healthy and investments in digital technologies, research & development, growth factories will continue in an accelerated mode. Favourable currency movements could help both revenue and margins. Organisation wide there is renewed focus on improving operational levers and cost control parameters, however the impact is expected to be visible only from Q3FY16 onwards.
Earlier, Persistent Systems too came out with its business update for Q1FY16. As per the business update on BSE announcement, Persistent is expecting a decline in revenues for the quarter ended June 30, 2015 (1QFY16) along with decline in margins. Persistent Systems said in a filing with BSE, "The weakness in our current engineering business coupled with the quarterly variability associated with our IP business, could result in marginally lower USD revenue for this quarter as compared to the previous quarter."
If you look at the March 2015 quarter result for overall IT sector, the financial results were not that much encouraging. Additionally, the earnings downgrades by IT companies themselves ring cautionary alarm against them. Hence we suggest readers to remain alert while investing in IT companies as their performance may get further worsen in coming quarters.