Tech Mahindra Shares Jump More than 8 per Cent on Turnaround Strategy

Heavyweight IT stock Tech Mahindra jumped more than 8 per cent on Friday on its new growth strategy.

Tech Mahindra is the top Sensex gainer and is up 8.31 per cent in trade.

Broking firm Prabhudas Lilladher said Tech Mahindra reported revenue of $1.55 billion, down 0.8 per cent QoQ in CC and down 1.6 per cent in reported terms, below the consensus of 1.4 per cent decline. The decline was led by the communication vertical (-2.7 per cent QoQ) along with the continued initiatives to de-risk its client mix.

The management laid out a three-year strategic plan to drive sustainable and predictable growth over FY25-FY27. The pillar of the growth strategy is to drive a balanced portfolio with reduced dependency on the communications business while drawing more attention to high-growth service lines and scaling potential top accounts.

The management indicated that it is a long-drawn approach and would require investments in the initial phase. It expects FY25 to be the year of turnaround followed by stable performance in FY26, while actual benefits are only to be achieved in FY27, the brokerage said.

JM Financial Institutional Securities said Tech Mahindra’s 4Q was expectedly soft. “4Q results however are inconsequential now. The goal post for the company (and the stock) has clearly shifted to FY27. Management presented its three-year turnaround roadmap. While execution will define the success, the plan looks robust on paper, at least to us. Importantly, a three-year plan indicates the long rope which the board has extended to the management team. Investors should too,” the brokerage said.