Tech Mahindra

FY26 was a pivotal year for Tech Mahindra, marked by the highest deal wins in many years, totaling USD 3.79 billion, a 42% YoY growth. The company secured two mega deals, including a global partnership with Orange Business, focusing on AI automation and digital transformation. Full-year revenues reached USD 6.385 billion (up 1.9% reported, 0.6% CC), with operating profit at USD 797 million (up 31.4% YoY) and margins expanding by 290 basis points to 12.6%. Q4 FY26 revenues were USD 1.625 billion (up 4.9% YoY, 2.4% CC), with operating profit margin improving by 70 basis points QoQ to 13.8%.

Retail, Travel, Transportation, and Logistics was the highest-growing vertical for FY26, up 7.3% YoY, driven by e-commerce expansion and automation. Manufacturing grew 5.9% YoY, led by aerospace and industrial process manufacturing, despite a softer US auto market. BFSI grew 3.7% YoY, with focus on asset and wealth management and payments yielding results. Communications grew 2.6% YoY, supported by stabilization and increased spend from a large US client. Hi-Tech declined 2.7% YoY due to restructuring and muted discretionary spend, while Healthcare declined 0.6% YoY due to regulatory challenges.

Tech Mahindra is advancing as an AI-first organization, launching an enterprise-wide Claude Core training program and collaborating with University College London for GenAI and quantum computing research. The company's AI strategy focuses on 'AI delivered right,' bridging traditional technology stacks with new AI stacks, and building capabilities across industry use cases, partnership ecosystems, and platforms like TechM Orion. This approach aims to drive modernization, relevance, and profitability, moving clients from POC to large-scale AI adoption.

The company is evolving its commercial model from T&M to outcome-based, focusing on 'tokens' of work delivered by a combination of digital and human labor. This approach provides transparency and predictability in pricing, especially for modernization efforts. Client successes include Kroger's AI-powered interactive shopping layer (Kroger Shopping Assistant) and AI Insights in Merchandising, Enbridge's large-scale operational transformation for service desks, and TForce's mainframe modernization using AI. These examples demonstrate the practical application of AI to deliver tangible client outcomes.

Operational rigor, including focus on utilization and right pricing, contributed to 10 consecutive quarters of margin improvement, with Q4 FY26 EBIT margin reaching 13.8%. The integration of acquired portfolio companies is nearing completion, with 100% integrated from backend, frontend, and middle-end. The company has also invested in an AI-enabled demand and supply management platform to improve responsiveness and fulfillment time. AI-led productivity improvements contributed 7% to overall productivity gains in FY26.

Tech Mahindra maintained a disciplined capital allocation policy. For FY26, free cash flow stood at USD 616 million, representing 115% of reported PAT, with cash and cash equivalents at USD 892 million. The board approved a final dividend of Rs. 36 per share, bringing the total dividend for FY26 to Rs. 51 per share, the highest ever. The full-year dividend payout ratio was 104% of PAT and 91% of free cash flow, exceeding the stated policy.

For FY27, Tech Mahindra reiterated its financial targets: achieving organic constant currency revenue growth above its peer group's average and an EBIT margin of 15%. The company aims to reach 30% Return on Capital Employed by next year, up from 26% in FY26. Management expressed confidence in these targets, citing a strong pipeline, diversified business mix, and continued investments in AI and talent. The effective tax rate for FY27 is expected to remain in a similar range as FY26 (27%).