Tech Mahindra share price rose After Monday’s sharp Selloff

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Offers of Tech Mahindra rose as much as 1.84% to hit intraday high of Rs. 386.30 in today’s session after Monday’s sharp selloff. At day’s lowest level, in yesterday’s session, offers of Tech Mahindra fell 17% eroding investor’s wealth by almost Rs. 7,000 crore as it announced lower-than-expected fourth quarter profit. Tech Mahindra shares shut with more than 11% losses yesterday.

Investors were disappointed after India’s fifth-greatest software services supplier Tech Mahindra’s profit fell 33% yearly to Rs. 590 crore in the January-March quarter, weighed down by weak margins and higher cost of services. Experts polled by Reuters had expected that Tech Mahindra would post consolidated profit of Rs. 783 crore. Tech Mahindra had detailed its quarterly numbers after-market hours on Friday.

Mumbai-based Tech Mahindra’s operating margin fell to 12% in the March quarter, from 16.7% a year prior, following a $20 million hit from the organization’s exit from a networking business contract, Milind Kulkarni, CFO of the organization, said. An appreciating rupee and a $15 million effect from “re-profiling” some of the company’s legacy business also contributed to the fall, Mr Kulkarni included. Consolidated tax costs additionally surged 28% to Rs. 232 crore, while cost of services jumped 14.7 per cent.

Domestic brokerage Nirmal Bang has retained its “offer” rating on Tech Mahindra for a target of Rs. 403. The cut in Tech Mahindra’s target cost is because of “structural weaknesses because of its less diversified revenue mix, higher customer concentration, lower margins and lower trending RoIC (return on capital utilized),” the financier said.

As of 10:07 am, shares of Tech Mahindra traded 1.5% higher at Rs. 385, beating the Nifty which was up 0.19%.

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