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Tech Mahindra Q4 net profit dips 23% to Rs 472 cr

The company had a debt at Rs 700 crore as of March 31, while cash and cash equivalent stood at Rs 3,212 crore.

Mumbai: Country's fifth largest software exporter Tech Mahindra Tuesday reported a steep 23.15 percent fall in net profit for the March quarter at Rs 472 crore due to currency headwinds, poor performance of recent acquisitions and a slowdown in large telecom clients.

The Mahindra Group company's pre-tax margins also saw a massive 5 percentage points decline over the December quarter to 15.2 percent.

Chief financial officer Milind Kulkarni said the poor show by LCC, which it acquired earlier last fiscal has hurt the margins by 1.40 percent, rupee appreciation shaved 0.90 percent off the bottom-line, while drop in utilisation levels hurt by 0.60 percent.

An overall slowdown in revenue coupled with higher outgoes on sales and general administration also resulted in a hit of 0.70 percent, he added.

The company's overall revenues rose over 19 percent, but a bulk of the growth came from the acquired entities, which contributed USD 100 million to the top-line, Kulkarni said.

On an organic level, the revenues were down 1.2 percent, which was on a slowdown in spends by the telecom clients who are looking at newer avenues of investments beyond IT, and also on currency headwinds.

The pre-tax profit came in at Rs 673.5 crore as against Rs 832.5 crore in the year-ago period.

Asserting that the company will continue to invest despite these numbers, managing director and chief executive director CP Gurnani said the company will focus on faster integration of its acquired companies and also growing its pretax margins.

Gurunani said a multitude of factors like slowdown among the communications clients, which account for half of its revenues and the volatility in the non-dollar currencies like euro, Australian and Canadian dollars, and the Brazilian real, which account for half of its billings, resulted in this impact.

Vice-chairman and managing director Vineet Nayyar said the challenge is to get the profitability levels of LCC -- the American company it had bought last November for USD 240 million -- to what will be comparable with domestic conditions and added that this is a "long haul" and we may see an improvement in the trajectory by end of the fiscal.

When asked about the guidance of raising revenues to USD 5 billion by the end of 2015, Gurnani conceded to difficulties given the current run-rate of revenue growth, but added it will "try to" achieve the target.

He also declined to comment if the company will do more acquisitions to accelerate revenues.

Nayyar, however, told PTI that it does acquisitions for strategic fits and may still do one if it finds a suitable target, in spite of the energies being spent on companies acquired earlier.

Both Nayyar as well as Gurnani repeatedly pointed to the track record of its acquisitions in the past and illustrated how well they have integrated with those companies, starting from the scam-tainted Satyam Computers.

As of March, it had a debt of Rs 700 crore and carried cash and equivalents of Rs 3,212 crore.

The results were announced after the market hours, which saw the company scrip close 1.18 percent down at Rs 640.55 apiece on the BSE.