The estimated PAT growth does not account for any potential impact from labour code-related provisions. However, given the strong scale of growth projected by brokerages, Tech Mahindra is likely to report profit expansion, setting it apart from many of its larger IT peers.
Revenue outlook: Modest growth, led by enterprise traction
Most brokerages anticipate that Tech Mahindra’s revenue growth will remain modest on a sequential basis, pointing to a slow and steady recovery rather than a sharp bounce-back. HSBC expects dollar revenue to rise by about 0.5% quarter-on-quarter, even as constant currency movements pose a 30-basis-point headwind.Nomura and Centrum Broking similarly project sequential growth of around 0.4–0.5% in constant currency terms, supported by improving momentum in BFSI, communications, and enterprise segments.
Nuvama is relatively more upbeat, forecasting constant currency growth of approximately 0.7% quarter-on-quarter, aided by a seasonally stronger retail performance and incremental contributions from telecom and manufacturing.
Kotak Equities expects 0.5% constant currency growth, supported by retail and the Comviva business, while also flagging signs of gradual stabilisation across key verticals.
Margins: Expansion remains the key theme
Margin expansion remains the key focus for investors this quarter. Most brokerages expect Tech Mahindra to deliver a notable sequential improvement in EBIT margins, driven by cost optimisation measures, operational efficiencies, and a favourable currency environment.
Centrum Broking expects EBIT margins to rise by around 45 basis points quarter-on-quarter, driven by gains from the company’s margin improvement programme and rupee depreciation. Nomura and Kotak Equities take a more optimistic view, projecting margin expansion of up to 60 basis points, supported by continued cost rationalisation and a better mix of higher-margin contracts.
Nuvama estimates margins to improve by about 40 basis points and expects Tech Mahindra to stay on track with its FY27 margin guidance of 15%.
Similarly, HSBC believes margin performance will remain aligned with the company’s stated FY27 targets, underscoring confidence in management’s execution on profitability.
Deal wins and pipeline
Deal momentum will be another critical monitorable. Nomura expects net new deal wins in the range of $600–800 million for the quarter, while Kotak Equities estimates a higher $875–900 million, implying strong sequential and year-on-year growth. Kotak notes that newer deals are likely to be higher margin, which could further support profitability in the coming quarters.
Management commentary on the deal pipeline, conversion timelines and traction in Europe is expected to be closely tracked, especially amid a still-cautious global demand environment.
What should investors watch
Brokerage firms expect communications and enterprise verticals to drive near-term growth, with BFSI also showing early signs of improvement. However, commentary on the telecom vertical remains crucial, given its historical importance to Tech Mahindra’s revenue mix.
Investors will also look for updates on recovery in the hi-tech and manufacturing sectors that have seen pressure over recent quarters.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)