Tech Mahindra (TechM), like HCLTech, has a profile that is different from its Indian peers.
The company offers a broad range of services, whereas its peers of the same size tend to focus on IT services. Its BPO business is disproportionately large (60,000 employees vs. 80,000 in IT services and ER&D services). Its ER&D business (PAC est.: 15,000 employees) is significant but still very far from HCLTech (~45,000).
TechM is telecom-centric and is little developed in financial services, whereas the Indian industry has thrived in BFSI. TechM has been unable to reuse its telecom expertise in other sectors, despite the pervasiveness of connectivity and billing in other industries.
Unlike TCS and LTIMindtree, TechM was not as fast as its competitors in expanding its work with its parent company. TechM now intends to accelerate its development within the Mahindra Group, although this will take several years.
Its financial performance has been weak for years, with low organic growth (flat in 2024, signaling an improvement) and EBIT margin (9.7%, whereas the Indian IT services industry operates at 15-25%).
TechM has been on a transformation journey for 18 months under a new CEO, Mohit Joshi. While early signs suggest the company is progressing, it is too early to tell whether Tech Mahindra will reach its FY27 objective of catching up with the rest of the Indian industry. The increased geopolitical uncertainty will certainly not help the company with its recovery.
Despite its financial performance woes, Tech Mahindra is structurally fit to benefit from the secular offshoring wave and IT investment. It also has many jewels, e.g., its digital agency BORN, its HER business with HCI, its digital engineering business, and its platform practices (for instance, SAP). Also, its large BPO business, despite its contact center/CX centricity, will benefit from many GenAI projects in the short term.
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