In among his first interviews after taking over as CEO of Tech Mahindra in December, 2023, Mohit Joshi was asked how much patience shareholders would need to have before he delivered a turnaround. Joshi’s answer, in which he quoted a former Goldman Sachs CEO, was, “We must always be long-term greedy”. On a more serious note, he went to add there was no reason, given the company’s strong platform and the heritage of the Mahindra Group, why Tech Mahindra shouldn’t deliver more than it was.
In April, 2024, “Scale at Speed”, a three-year turnaround plan to be executed by 2027, was unveiled. The core objectives are to achieve a growth rate in the top line that outpaced the average of the top 6 IT players and to expand the operating margin to 15% by FY27. Moreover, Joshi wants an organisational transformation. Explaining the targets, Joshi said the plan for margins is about fixing the pyramid, getting better rate realisations and other interventions including automation.
Nine months down the line, experts say, Tech Mahindra is progressing at a steady pace and is on the right path for a turnaround. In a recent update, Joshi said the company has shifted to a global service line model and enhanced its focus on key areas such as large deals from must-have clients with revenues exceeding $5billion. Moreover, it wants to re-balance the portfolio across industries and geographies.
To be sure, the deal flows are getting better. The good news is that the total contract value has risen from $381 million in Q3 FY24 to $745 million in Q3 FY25. Experts point out that the deal pipeline, win ratios, contracting disciplines and the quality of wins have all improved. “The emphasis of management is on deals that meet a high bar on profitability. The company does not want to participate in deals that involve ‘heroic’ assumptions on productivity in the outer years,” Kawaljeet Saluja at Kotak Institutional Equities says.
Others have noted that most of the deals have a have a cost take-out or consolidation flavour, with some involving new logos as well. They feel it is impressive that the company has been able to expand TCV despite its focus on margin improvement in what is highly competitive environment.
“We have shown consistent improvement now for the past six quarters in terms of large deals.
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