Tech Mahindra Shares Rise 10% On CEO Mohit Joshi’s 3-yr Growth Plan
During an analyst call, Joshi detailed initiatives aimed at revitalising the company’s growth trajectory and optimising operational efficiencies
Tech Mahindra’s stock zoomed 10 per cent in intraday trading on Friday, reaching Rs 1,309 per share following the announcement of a new three-year strategic growth plan by CEO and Managing Director Mohit Joshi.
The plan, dubbed ‘Vision 2027’, was unveiled during an analyst conference on the Q4 earnings call Thursday, where Joshi detailed initiatives aimed at revitalising the company’s growth trajectory and optimising operational efficiencies.
Under ‘Vision 2027’, Tech Mahindra will undergo significant organisational restructuring with a phased approach to improvements beginning with the “Turnaround Phase” in FY25. This initial phase will focus on integrating portfolio companies and investing in key markets and accounts. Additionally, the launch of the ‘Turbocharge Program’ will look to enhance growth in top client accounts.
CEO Joshi outlined that Tech Mahindra will concentrate on expanding deals with its active clients, with a particular focus on its top 80 clients. These clients are especially critical as each offers business opportunities valued at USD 20 million or above. This targeted approach is part of the broader strategy to improve predictability and performance as the company progresses through its turnaround phase.
A critical component of Joshi’s strategy is “Project Fortius”, which targets margin expansion through various cost optimisation measures. Tech Mahindra’s operating margin, which had previously dropped to a low of 4.2 per cent in Q2, showed improvement in Q4, reaching 7.4 per cent. The company now plans to continue this upward trajectory, with an ambitious target to expand its EBIT margin to 15 per cent by FY27.
During the post-earnings Q4 analyst call, Joshi and CFO Rohit Anand detailed Tech Mahindra’s financial strategy, stating that their cost-saving measures are set to decrease annual expenses by USD 250 million. This reduction is part of their broader plan to achieve their margin goals. Anand said that the savings will also free up capital for the company to invest in new capabilities. These investments are expected to facilitate the growth of new revenue-generating verticals by FY26.
The roadmap also includes the ‘Stabilisation Phase’ in FY26, followed by the ‘Reaping Returns’ phase in FY27, where the company expects to see a more robust structural mix and sustained improvements in profitability. Tech Mahindra said it intends to enhance its focus on key verticals such as telecommunications, manufacturing, BFSI and AI technologies.
Tech Mahindra will also leverage its affiliation with the Mahindra Group to become the primary system integrator and transformation partner, aiming to co-create and innovate within the ecosystem.
Despite the optimism surrounding the new strategic plan, the company reported a decline in its financial performance for Q4 FY24, with a 41 per cent drop in consolidated net profit and a 6.2 per cent decrease in revenue year-on-year (YoY). For the full fiscal year FY24, the net profit saw a sharp decline of 51.2 per cent with revenue also decreasing by 2.4 per cent.
Majority brokerage firms remain cautious about the company’s near-term prospects, citing these financial results.
However, ICICI Securities upgraded Tech Mahindra stock to ‘ADD’ from HOLD. “[..] we expect steadiness and predictability in margin and growth, steady uptick in TCV and no more one-offs. We continue to value the stock at 20x on FY26E EPS of INR 65 to arrive at our TP of INR 1,350. We upgrade to ADD from HOLD before,” the brokerage said in its note.
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