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Tech Mahindra (TEML.BO; Rs701.95; 3M)
Takeaways from Mumbai — Tech Mahindra (TechM) presented today at our
India Investor Conference in Mumbai. Below are the key takeaways:
What’s new — Discussions on discretionary spends have increased and the
deal velocity has improved on a YoY basis; deals are getting closed now vs.
delays seen previously. Both TechM and Satyam have a significant margin lever
in the form of employee pyramid.
Telecom sector still has opportunities — There are still plenty of opportunities
available as the telecom operators try to enhance revenues through VAS (value
added services), try and control costs through network modernization &
rationalization of applications and address the still largely untapped opportunity in
the emerging markets space.
Where does TechM see opportunities? — (1) Mining of existing clients –
though BT and AT&T (in terms of volume, AT&T still offshores only a small part of
its IT efforts) are large customers, TechM sees many other potential customers
that can ramp up over a period of time to significant sizes. (2) New segments like
Infrastructure Services, VAS, BPO, Network Services, etc.
Outlook on BT — Management continues to expect this account to remain
flattish over the near term. BT globally is going through its own unique challenges
and hence has deferred several new initiatives – the company does not have
clarity when these may come back.
Other issues — (1) Employee pyramid is a big margin lever, while the currency
is the biggest unknown. (2) BT shareholding is an issue and the company has no
clarity on that – M&M has waived its right of first refusal.
Update on Satyam — The bulk of cost restructuring is done and the margin
driver going forward will primarily be revenue growth, though there is still some
scope for cost optimization. Most of the legal issues have been resolved; the
ones pending are: (1) tax dispute with authorities, and (2) cases by the Raju
group of companies. However, these in no way can be an impediment to the
impending TechM-Satyam merger.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tech Mahindra (TEML.BO; Rs701.95; 3M)
Takeaways from Mumbai — Tech Mahindra (TechM) presented today at our
India Investor Conference in Mumbai. Below are the key takeaways:
What’s new — Discussions on discretionary spends have increased and the
deal velocity has improved on a YoY basis; deals are getting closed now vs.
delays seen previously. Both TechM and Satyam have a significant margin lever
in the form of employee pyramid.
Telecom sector still has opportunities — There are still plenty of opportunities
available as the telecom operators try to enhance revenues through VAS (value
added services), try and control costs through network modernization &
rationalization of applications and address the still largely untapped opportunity in
the emerging markets space.
Where does TechM see opportunities? — (1) Mining of existing clients –
though BT and AT&T (in terms of volume, AT&T still offshores only a small part of
its IT efforts) are large customers, TechM sees many other potential customers
that can ramp up over a period of time to significant sizes. (2) New segments like
Infrastructure Services, VAS, BPO, Network Services, etc.
Outlook on BT — Management continues to expect this account to remain
flattish over the near term. BT globally is going through its own unique challenges
and hence has deferred several new initiatives – the company does not have
clarity when these may come back.
Other issues — (1) Employee pyramid is a big margin lever, while the currency
is the biggest unknown. (2) BT shareholding is an issue and the company has no
clarity on that – M&M has waived its right of first refusal.
Update on Satyam — The bulk of cost restructuring is done and the margin
driver going forward will primarily be revenue growth, though there is still some
scope for cost optimization. Most of the legal issues have been resolved; the
ones pending are: (1) tax dispute with authorities, and (2) cases by the Raju
group of companies. However, these in no way can be an impediment to the
impending TechM-Satyam merger.
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