Tech Mahindra (TML) held a conference call to discuss third quarter results and future prospects. Mr Vineet Nayyar, Vice Chairman and CEO, Tech Mahindra, addressed the call.
Highlights of the call
- The management believes that the environment is challenging. The performance of the Company was impacted by GBP depreciation against US dollar with about 70% of the revenues comes from GBP.
- Tech Mahindra won a 5-year transformation program where in the total spent is anticipated to be more than GBP 500 million wherein Tech Mahindra is expected to get a share of GBP 350 million. The transition of this work will commence from April 2009. The contract includes transition of work from other vendors and other geographies to Tech Mahindra. Then the Company would set up a new application and close down the old technology. 60% of the revenues from the deal would come in first 3 years. The company paid GBP 55 million as upfront fees.
- The Barcelona deal BTGS contract of US$ 34.9 million against US$ 32 million in the sequential quarter. In GBP terms, the revenue was GBP 22.2 million against GBP 16.7 million in the sequential quarter. The traditional business had revenues of GBP 59.5 million against GBP 67.9 million in the sequential quarter.
- The pricing pressure is more country specific and sector specific and there is no market pricing pressure.
- The realized rate for the quarter was Rs 49/US$ against Rs 44.09/US$ in the sequential quarter. For GBP was Rs 79/GBP down from Rs 83.26/GBP in sequential quarter. The realized rates for Q4FY09 would be lower. 1% movement in GBP impacts OPM by 40bps.
- The Company had made campus offers for 5500 people for 2008-09 of which only 2100 have joined and balance has been deferred. For FY2009-10, the Company has made campus offers for 1500 people.
- For the quarter forex loss was US$ 9 million. The MTM losses in the Balance Sheet have come down to US$ 24 million from US$ 26 million in the sequential quarter.
- The Company has forex hedges of US$ 720 million at average rate of Rs 42.71/US$ and GBP 265 million at average rate of USD 1.98/GBP against US$ 800 million at average rate of Rs 42/US$ and GBP 300 million at average rate of USD 2/GBP in the sequential quarter.
- The Net addition of manpower during the quarter was at 294 (766 additions in sequential quarter) employees totaling to 25429 employees as on December 31, 2008. There was addition in headcount in software of 506 and reduction of 207 employees in BPO and 5 reduced in support staff. The onsite-offshore mix as far as revenue generation is concerned was stable at 40:60. Utilization including trainees was down 200bps at 67%.
- The onsite-offshore mix as far as revenue generation is concerned was stable at 40:60.
- Of the revenues, 70% billing is done in GBP and 30% in US dollar.
- Cash & cash equivalents stood at US$ 110 million against US$ 83 million at the end of the sequential quarter.
- The Company is seeing visibility in India, Middle East and Africa where new licenses have been issued.
- Of the BPO revenues, BT contributes 40%.
- The contribution of BT to revenues was down at 57% against 60% in the sequential quarter, in absolute terms it was down 7.7%. Top 2-5 clients contribution was up at 22% same in sequential quarter and in absolute terms it decreased 2.8% and that of top 6-10 clients was up 11% at 8%. The number of active clients was stagnant at 110.
- The capex for 3 years starting FY09 was US$ 150 million.
- The company has long-term contracts of close to US$ 3 billion executable over 3 to 7 years of which US$ 600 million is non-BT.