DBT Bureau
Bengaluru, 27 April
Mohit Joshi, the new CEO & MD of Tech Mahindra has his tasks cut out. He has to turn around the mid-tier IT firm in a difficult demand environment. That is the reason, he unveiled a 3-year roadmap to accelerate revenue growth, & achieve a decent operating margin apart from derisking the company’s business by reducing concentration risk.
Announcing its FY24 results on April 25, Tech Mahindra presented a blueprint for turning around the company. Titled ‘Vision 2027’, the plan has three distinct phases. In FY25, Tech Mahindra will be in the ‘Turnaround phase’; in FY26, it will be in the ‘Stabilization phase’, & in FY27, it will be ‘Reaping Returns’.
In FY25, the company will focus on investing in key accounts, markets, and service lines. Under its ‘Turbocharge’ programme, the IT firm plans to increase its wallet share in key accounts for which it has identified 80 clients.
Similarly, under ‘Project Fortius’, the management plans to work on multiple levers for driving its operating margin over the next three years. Under ‘Project Fortius’, it also plans to hire, train, and deploy professionals with 2-3 years of experience & freshers in projects for reducing cost of delivery. Tech Mahindra’s operating margin improved to 7.4 percent in Q4, an increase of 200 basis points from the previous quarter.
Similarly, in FY26, the company will continue its investments in building capabilities and reduce its dependence on the Communications, Media & Entertainment (CME) vertical along with increasing the revenue share of manufacturing, BFSI, and other verticals. The company drew around 36% of its revenue from the CME vertical.
By FY27, the company aims to achieve an operating margin of 15% and $250 million of additional benefits each year.
“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 a stable performance in FY26, while actual benefits are only to be achieved in FY27,” Brokerage firm, Prabhudas Lilladher wrote in a note.
It, however, said that the company would have to overcome multiple challenges to achieve its set targets. “We believe, the near-term macro uncertainties would provide limited headroom for growth and margin recovery until FY25. More importantly, the company’s inherent weakness and seasonality of its portfolio businesses would make it even harder for the milestone to be achieved within the given timeframe,” the brokerage firm wrote.
