Tech Mahindra Limited

Tech Mahindra closed FY25 with a revenue of $6,264 million, achieving 0.3% growth on a constant currency basis, a significant improvement from a 5% decline in the previous year. The company's operating profit for the full year stood at $607 million, marking a 60% year-on-year growth, with margins expanding by 360 basis points to 9.7%. For Q4 FY25, revenue was $1,549 million, with a 0.3% YoY constant currency growth, but a sequential decline of 1.5% due to delayed client renewal decisions and seasonal retail trends. Q4 EBIT margin reached 10.5%, expanding 40 basis points QoQ.

Management reiterated its commitment to the FY27 strategic roadmap, aiming for growth greater than the peer average, an EBIT margin of 15%, and a return on capital exceeding 30%. FY25 focused on laying strong foundations, with FY26 being crucial for sustained acceleration towards these goals. The strategy involves optimizing industry, geography, and service line mix, focusing on large profitable deals, and building a resilient delivery organization to achieve these long-term targets.

Full year deal wins (TCV) amounted to $2.7 billion, a 42.5% year-on-year increase, with Q4 TCV at $798 million, up 60% YoY. These wins were broad-based across verticals and geographies, emphasizing profitable growth and strategic partnerships. The company added 45 'must-have' clients, with approximately a quarter being Fortune 500 companies, demonstrating increased penetration in target accounts. Management highlighted a disciplined approach to deal-making, focusing on contract terms and value realization rather than speculative risks.

Operational efficiencies, driven by 'Project Fortius', contributed significantly to margin expansion, resulting in a 360 basis point margin improvement for the full year. Key initiatives include enhancing productivity in fixed-price engagements through AI and automation, optimizing pricing for niche skills, and integrating portfolio companies. While wage hikes negatively impacted Q4 margins by 1%, this was offset by operational actions and favorable FX movements, leading to a 40 basis point sequential margin expansion to 10.5%.

Tech Mahindra emphasized its investment in talent development, including upskilling and reskilling programs, and a focus on employee satisfaction, which reached a three-year high. The company launched 'TechM Consulting' and made key leadership hires to strengthen its foundation. Efforts to simplify internal processes, foster innovation through programs like 'InnoQuest', and drive a performance-oriented culture were highlighted as critical for organizational transformation and achieving future goals.

The company launched its 'AI Delivered Right' strategy, focusing on productivity, transformation, innovation, and assurance. This involves leveraging AI for IT operations optimization, engineer productivity, and back-office processes, exemplified by work with BT. Tech Mahindra also introduced a comprehensive suite of AI offerings and integrated its proprietary AI model, IndusQ LLM, with Qualcomm's AI hub, positioning itself as a leader in AI-driven solutions and helping clients extract value from AI.

The Board recommended a final dividend of Rs 30 per share, bringing the total FY25 dividend to Rs 45 per share. This translates to a 104% payout ratio of PAT and 122% of FCF, reflecting a 12.5% increase over the previous year's dividend. The company generated $150 million in free cash flow in Q4 FY25 and $613 million for the full year, with cash and cash equivalents totaling $896 million, demonstrating strong liquidity and commitment to shareholder returns.