Tech Mahindra Q1 FY27 Results (NSE: TECHM)
Signal: Margin expansion
The read
Tech Mahindra delivered a strong quarter with accelerating revenue growth (17.7% YoY, highest in several quarters) and a fifth consecutive margin expansion (EBITDA margin 17.5%, +296bps YoY), led by employee cost leverage and broad-based IT demand. Profit after tax grew 28.4% YoY, with EPS tracking. The standalone entity grew slower (2% revenue), highlighting the importance of subsidiaries. The Satyam contingent liability (₹12,304 million) remains a legacy overhang, though management believes it is not payable.
| Metric | Value | YoY | QoQ |
|---|---|---|---|
| Revenue | ₹15,711.9 Cr | 17.68% | 4.22% |
| EBIT | ₹2,263.9 Cr | 53.26% | |
| Net profit | ₹1,465.1 Cr | 28.45% | |
| EPS | ₹16.53 | 28.44% | |
| EBIT margin | 17.46% |
P&L walk
Revenue growth accelerated to 17.7% YoY (vs 12.6% in Q4), driven by IT (+17.6%) and BPS (+18.2%). EBITDA margin rose 296bps YoY to 17.5% – 5th consecutive expansion – as employee costs grew only 5% YoY (operating leverage). PAT grew 28.4% YoY, tracking revenue and margin gains, though finance costs and negative other income (forex) partially offset.
Segments
Both segments drove growth: IT revenue up 17.6% YoY (segment result +39.8% YoY) and BPS revenue up 18.2% YoY (segment result +30.4% YoY); no segment turned loss-making or showed material divergence.
Key positives
- Revenue growth accelerated to 17.7% YoY from 12.6% in Q4FY26, driven by IT (+17.6%) and BPS (+18.2%).
- EBITDA margin expanded 296bps YoY to 17.46%, marking the 5th consecutive quarter of expansion, supported by employee cost growing only 5% vs 17.7% revenue growth.
- PAT grew 28.4% YoY, with EPS growth in line, no dilution.
- Segment results: IT PBIT up 39.8% YoY, BPS PBIT up 30.4% YoY, indicating strong operational leverage.
Key concerns
- Subcontracting expense grew 36.6% YoY, far outpacing revenue growth, which may pressure margins if not temporary.
- Finance costs increased 43% YoY and 25% QoQ, indicating higher debt or rates.
- Other income was negative ₹1,064 million due to forex losses, compared to positive ₹2,183 million last year.
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