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Tech Mahindra Ltd. — Management meeting highlights
Company Update
We organized investor meetings with Tech Mahindra (TML) in Asia where
management highlighted opportunities for TML in telecom vertical and
provided update on its 42% subsidiary Mahindra Satyam (Satyam).
Worst behind in telecom
It expects IT spends in telecom vertical to recover in 2H FY12 driven by new
initiatives such as cloud and adoption of new technologies. Management
highlighted that over last 2-3 years TML has expanded service offerings beyond
applications to include Infrastructure management, BPO, security, VAS & network
services. Revenue contribution from these services improved from 5% to 25%
during this period and offers 3-4x opportunity than traditional application
business.
BT – stable revenues
Expects BT revenues (43% revs) to be stable in the range of 70-72mn GBP per
quarter and remains bullish on growth in non BT i.e. AT&T and emerging
markets. Non BT revenues grew at CAGR of 30% during FY08-10. 80% of BT
revs are from maintenance services and likely to remain stable in our view.
Mahindra Satyam.. progress on track
Management reiterated that performance at Satyam was on expected lines and
the subsidiary should achieve industry level growth and profitability over next 15-
18 months. Margin expansion likely to be driven by revenue growth given scope
to leverage on SG&A (23% of revs) and expand employee pyramid. On merger
management indicated that while minor hurdles remain larger issues such as
Upaid case & Class Action Lawsuit has been settled successfully. Our adj.
consolidated EPS projection for TML is at Rs57 for FY12e and Rs71 for FY13e.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tech Mahindra Ltd. — Management meeting highlights
Company Update
We organized investor meetings with Tech Mahindra (TML) in Asia where
management highlighted opportunities for TML in telecom vertical and
provided update on its 42% subsidiary Mahindra Satyam (Satyam).
Worst behind in telecom
It expects IT spends in telecom vertical to recover in 2H FY12 driven by new
initiatives such as cloud and adoption of new technologies. Management
highlighted that over last 2-3 years TML has expanded service offerings beyond
applications to include Infrastructure management, BPO, security, VAS & network
services. Revenue contribution from these services improved from 5% to 25%
during this period and offers 3-4x opportunity than traditional application
business.
BT – stable revenues
Expects BT revenues (43% revs) to be stable in the range of 70-72mn GBP per
quarter and remains bullish on growth in non BT i.e. AT&T and emerging
markets. Non BT revenues grew at CAGR of 30% during FY08-10. 80% of BT
revs are from maintenance services and likely to remain stable in our view.
Mahindra Satyam.. progress on track
Management reiterated that performance at Satyam was on expected lines and
the subsidiary should achieve industry level growth and profitability over next 15-
18 months. Margin expansion likely to be driven by revenue growth given scope
to leverage on SG&A (23% of revs) and expand employee pyramid. On merger
management indicated that while minor hurdles remain larger issues such as
Upaid case & Class Action Lawsuit has been settled successfully. Our adj.
consolidated EPS projection for TML is at Rs57 for FY12e and Rs71 for FY13e.
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