Mastek

Mastek reported a 4.8% constant currency revenue reduction and a 3.7% sequential decline in INR terms, reaching ₹905.7 crores. This was primarily due to seasonal headwinds, higher furloughs in the UK and Public Sector customers, and project go-lives leading to the right-shifting of new programs. The furlough impact alone accounted for approximately $2.7 million in revenue reduction during the quarter.

Despite the top-line pressures, Mastek demonstrated strong operational efficiency, with EBITDA margin improving by 60 basis points to 16.1%. Net profit margin also saw a significant increase of 149 basis points quarter-on-quarter, reaching 11.7%. This was achieved through continuous operational rigor and AI-led productivity gains, which helped negate the INR 6.4 crores impact from labor code changes.

The company emphasized strengthening its digital engineering capabilities, particularly with AI integration, which has eliminated technology gaps with larger players. Mastek was recognized by leading analyst firms as a top performer in mid-market digital engineering and by Oracle as a key partner in AI transformation, receiving three key recognitions. This AI-led capability has driven 15% to 80% productivity improvements for clients.

A significant development in Q3 was the win of a new large account in the financial services sector, a circa $20 million deal. This, coupled with recognition as a contender in the financial services sector by various analyst firms, gives Mastek confidence in developing this as its third core sector after Healthcare and Public Sector. The company continues to enhance its data and Salesforce capabilities aligned with these vertical sectors.

The 12-month order backlog grew 5.7% quarter-on-quarter and 18.4% year-on-year, reaching $296 million. The total order backlog increased by more than 30% year-on-year. Mastek is strategically shifting towards longer-term contracts, negotiating 3-year to 5-year deals instead of 1-year renewals for AI-led initiatives, offering client discounts and productivity efficiencies in return for extended commitment.

The UK and Europe markets experienced higher furloughs, accounting for almost 70% of the total furlough impact. While some Middle East WAR revenue recognition was delayed from Q2 and Q3, management expects it to be recognized in Q4. The US market is still in a turnaround phase, with sustainable improvement anticipated in FY27, driven by a strengthened team and improved pipeline, including over $30 million in North America order book this quarter.

Mastek reported a strong net cash position of INR 346 crores, significantly up from INR 135 crores last quarter, driven by almost INR 210 crores in operating cash generated in Q3. The company declared an interim dividend of INR 8 per share, representing 160% of face value, reflecting its robust cash generation and commitment to shareholder returns. DSO increased to 84 days but is expected to improve next quarter.

The company completed key leadership changes, including the addition of Deepak Kedia as CFO and two other important hirings in Data and Salesforce capabilities, forming a cohesive leadership team. Mastek was also recognized among the top 10% companies globally for its environmental scores, underscoring its commitment to social responsibility alongside business growth.