India's Tech Mahindra misses Q4 revenue view on weak communications segment

An employee holds a cup as she works at her desk inside the Tech Mahindra office building in Noida on the outskirts of New Delhi, India March 7, 2019. Picture taken March 7, 2019. REUTERS/Adnan Abidi/File Photo

Bengaluru (Reuters) -Tech Mahindra, India's fifth-largest software company, reported fourth-quarter revenue below analysts' estimates on Thursday due to weakness in its communications and media segment as macro headwinds weighed on overall demand.

Consolidated revenue fell 6.2% year-on-year to 128.71 billion rupees ($1.55 billion) in the January-March quarter. Analysts, on average, expected revenue of 129.55 billion rupees, as per LSEG data.

The communications and media segment, which contributes to a third of its overall revenue, saw a 16.5% decline.

Stubbornly high inflation, economic uncertainties and geopolitical risks have pushed clients to cut down on discretionary tech spending.

Industry body Nasscom estimated that overall revenue growth in the technology sector more than halved to 3.8% in fiscal 2024.

The Pune-based company's net profit fell about 41% to 6.61 billion rupees, missing analysts' average estimate of 7.57 billion rupees.

Earlier this month, market leader Tata Consultancy Services posted a lower-than-expected revenue, although it said a strong deal pipeline will drive growth this fiscal year. Peer LTIMindtree also missed fourth-quarter revenue estimates amid weakness in its banking unit.

The Mahindra group company's net new deal bookings stood at $500 million, compared with $382 million in the previous quarter and $592 million in the year-ago period.

Brokerage Jefferies, in a post-earnings research note, said the company's fourth-quarter results did not have any "meaningful surprises", while the net new deals were "uninspiring".

"This is the year of turnaround, so you should expect to see volatility ... we expect to come back fully to growth by the second half of the (fiscal) year," said CEO Mohit Joshi, adding the decline in the communications vertical was on account of macro headwinds.

This is the first full quarter under Joshi's leadership, who took over in December.

Shares of the company closed 0.4% higher ahead of the results.

($1 = 83.3028 Indian rupees)

(Reporting by Sai Ishwarbharath B and Haripriya Suresh; Editing by Janane Venkatraman, Eileen Soreng and Sohini Goswami)

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