Tech Mahindra Shares Slump Over 9% on Q1 Warning

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Deepak Mandal, Star Live 24
Monday, June 29, 2015
Published On: 15:11:28 PM

Tech Mahindra shares fell over 9 per cent to hit intraday low of Rs 471.7 on Monday after the company said that its revenue and profit margin may witness a sequential decline in the first quarter of FY15 due to higher US visa sponsorship costs for its employees.

Local IT services companies send hundreds of workers to the United States to work on client projects, making them among the top applicants for US visa.

Applications for H-1B visas allowing US businesses to hire foreign workers in science, engineering and computer programming have already reached a record 233,000 in the financial year 2016.

After Persistent Systems and KPIT Technologies, Tech Mahindra becomes the third company to issue a profit warning for the first quarter of the current fiscal. 

In a release to exchanges, Tech Mahindra said, "Q1 of FY16 has some headwinds and tailwinds which could see a risk of marginal decline in both revenues and EBITDA margin on a sequential basis."

Tech Mahindra said seasonally weak mobility business will be a drag on Q1 revenues and EBITDA (earnings before interest, taxes, depreciation and amortization).

However, Tech Mahindra said that its efforts to improve operational levers and cost control parameters will show its impact from Q3 of FY16 onwards.

As per estimates of CLSA, Tech Mahindra's revenue were expected to grow 4.6 per cent in Q1 and EBITDA was seen growing 7 per cent.

However, post this warning by Tech Mahindra, earnings downgrade by brokerages are expected in the coming days, analysts say.

As of 12.05 p.m. shares in Tech Mahindra traded 9.12 per cent lower at Rs 473.90 apiece, compared to 1.5 per cent fall in the broader Nifty.

Courtsey- NDTV

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