Jan 16 (Reuters) - Engineering research and development (ER&D) firm Tata Technologies reported a 96% drop in third-quarter profit on Thursday, hurt primarily by a one-time charge tied to India's new labour codes, their largest such drop since the company's 2023 market debut.
Going forward, the firm is still "poised for a sharp acceleration in Q4," CEO Warren Harris said in a statement, expecting more than 10% sequential revenue growth.
The Tata group company, which counts Jaguar Land Rover and Tata Motors among its largest clients, said consolidated net profit fell to 66.4 million rupees ($731,036) in the October-December period from 1.69 billion rupees a year earlier.
Tata Technologies booked a one‑time exceptional charge of 1.4 billion rupees in the quarter after India notified new labour codes, which raised its gratuity and leave‑related liabilities.
The codes, which came into effect in November, require employee wages to be at least 50% of cost to company, and benefits like provident fund and gratuity to be determined based on wages.
Previously, companies like TCS and HCLTech have reported similar one-time charges to factor in the new labour codes, while peer ER&D firm Tata Elxsi's profit was hit by it.
Tata Technologies had said in October it expected short-term tactical challenges and margin pressure in the third quarter, due to "near-term temporary headwinds" and salary hikes.
"Margin headwinds from Q3 are behind us, and we expect to return to—and exceed—the Q2 adjusted margin run-rate," CFO Uttam Gujrati said.
Revenue from its services segment, making up 77% of overall revenue, rose 4.7%, while technology solutions revenue remained flat.
The company's overall revenue rose 3.7% to 13.66 billion rupees.
($1 = 90.8300 Indian rupees)
(Reporting by Aleef Jahan in Bengaluru; Editing by Ronojoy Mazumdar)
