Tech Mahindra’s Q4 results underscore why it’s been an unexciting bet for investors

After an exceptionally strong performance in the December quarter, things were expected to cool down at Tech Mahindra Ltd. But as it turns out, growth fell off the cliff in the March quarter. Dollar revenues grew just 0.5% on a sequential basis, notably lower than the Street’s estimates. Worse still, profit margins narrowed at a higher-than-expected rate, underscoring cost pressures.

It’s interesting to note that the company’s revenue growth has moderated at a time when its largest business vertical, communications, returned to the growth mode. Revenue at the division, which generates about 41% of overall sales, grew 4.4% on a sequential basis. Growth stood at 4.6% on a year-on-year basis, up from 0.1% in the December quarter. Company-wide growth, on the other hand, slowed to merely 1.9% in the March quarter year-on-year, down from 4.3% in the December quarter.