Institutional EquitiesOEMs like Ericsson, Huawei, Nokia, ZTE, Samsung, etc. With Huawei and ZTE facing resistance in equipment ... by explosive growth in both intelligent and robotic

Institutional Equities

Man

agem

ent M

eet U

pdat

e

Reuters: TEML.BO; Bloomberg: TECHM IN

Tech Mahindra

Could See Further Growth Weakness If Macro Stress Persists We recently met the management of Tech Mahindra’s (TML’s) to see if there has been any impact of the US-China trade tensions as well as slowing global growth on its prospects in FY20. TML had recalibrated its revenue growth guidance for FY20 post 4QFY19 against the one given at its analyst meet (link) and post 3QFY19. Enterprise segment (~59% of FY19 revenue) is expected to grow at 6%-8% versus 8%-10% indicated earlier. Communication vertical (~41%) growth has been upped by 100bps from the mid-single digit indicated then. TML indicated that it is too early to get any client reaction due to incremental stress from the US-China trade tensions. Considering that a broad swathe of companies had already indicated cost pressures (see our sector report We Downgrade of December 2018, page 11-12) from the 10% tariff that was imposed in 2018 we think that pressure would continue to pile up and could impact IT spending going forward and impact not just TML but the entire Indian IT services industry. Our take is that there could be modest cuts in the guidance ahead and will be visible as early as in 1QFY20 results commentary (which is ~40-60 days away). On the margin front, we believe TML will hold on to its FY19 EBIT margin with a slightly larger increase in salaries being set off by deeper use of automation and better profitability of portfolio companies. FY19 has been a story of strong margin improvement with disappointments (and volatility) in revenue growth. It remains to be seen if TML delivers better revenue growth in FY20 while holding constant margins. TML’s seven-quarter margin expansion journey had come about through tightening of operations (employee utilisation, higher use of automation, better portfolio profitability, modest salary hikes) and letting go of less profitable customers, focus on digital, etc. The combined effect of higher salary hikes, visa costs, and seasonality from Comviva, strong INR, etc will drag margins in 1Q. Management indicated that any material growth pick up will be only in 2HFY20. The enterprise services segment of TML is fairly volatile as it is more in ‘Change the business’ side which is more project oriented in nature. Communication vertical which shows some momentum in recovery since the last three quarters will also see a slowdown in 1QFY20 because of Comviva seasonality. As per management, inorganic growth looks challenging with no attractive acquisition targets spotted due to crowding out by PE firms and consequent high valuations. Post 4QFY19 and our meeting with the management, we have pared our revenue estimates in FY20, however, maintained those for FY21. We continue with our Sell rating on TML with a reduced target price of Rs562 based on a target multiple of 9.9x March 2021 EPS. The target multiple is at a 40% discount to that of TCS and reflects TML’s structural weakness because of its less diversified revenue mix, higher client concentration, slower organic growth, lower margins, lower RoIC and behind-the-curve investments in automation and digital. Our Sell rating is driven by the view that industry will witness P/E de-rating in a no-growth year we expect in FY21.

Disappointing 4QFY19 performance: In terms of both the revenue growth and margins (see Exhibit 3) going by the broad guidance given for FY19, revenues were flat QoQ in CC terms (our estimate of 3%). The revenues were driven by BPO (+5.3%) and communication segment (4.4%), while the enterprise segment dragged (-2.2%). EBITDA margin at 18.4% (110bps below our estimate) was impacted by currency, some one-offs besides slower than expected growth. Enterprise segment revenue was disrupted by deal deferrals in healthcare and seasonal weakness from retail. Vertical wise, except Communication and Technology, Media and Entertainment, all other verticals de-grew on a QoQ basis.

New deal TCV growth has been strong but not reflected in either FY19 growth or guidance for FY20: Total large new deal TCV for FY19 was up 35% but that has not translated into meaningful revenue growth considering likely slow ramp ups in enterprise and also possibly compression in the existing book of business due to automation, degrowth in some large clients as they came under pressure. Some of the stronger revenue growth in recent times has geographically come from ROW region with big contributions from India, APAC, etc. The margins per se in this segment may be below the company average. The margin improvement shown in FY19 BY TML, thus, is commendable in light of this.

5G pick-up to occur by FY21: There has been an increase in noise around 5G gaining traction in last many quarters. There was a very marginal contribution of revenue from 5G in FY19 communication revenue – likely from Rakuten - the Japanese conglomerate. 5G is more enterprise-centric than consumer-centric and adoption may be slower than expected. TML is of the view that the contribution of 5G will be fairly small in FY20. In FY21, when it expects an uptick, the contribution to total revenue would likely be in the mid-high-single-digits based on current understanding. During the meeting, it was reiterated that 5G opportunity for TML is going to first play out on the network services side, with TML implementing network expansion (likely through sub contracts) through OEMs like Ericsson, Huawei, Nokia, ZTE, Samsung, etc. With Huawei and ZTE facing resistance in equipment sales in both the US and Europe some of the subcontracting opportunity that might have come TML’s way may not be there anymore. However, we comprehend that it has rapport with Ericsson and the others. Albeit, as per the management, Huawei impact is not worrisome as it is not one of TML’s top 20-30 customers. The 5G pickup is important for TML as Communication vertical has been TML’s forte and the management expects that 5G can catapult the vertical’s growth from mid-single-digit to a low double-digit by FY21 if the pickup is as per expectations.

SELL

Sector: Information Technology

CMP: Rs750

Target price: Rs562

Downside: 25%

Girish Pai Head of Research [email protected] +91-22-6273 8017

Key Data

Current Shares O/S (mn) 984.3

Mkt Cap (Rsbn/US$bn) 736.5/10.6

52 Wk H / L (Rs) 847/612

Daily Vol. (3M NSE Avg.) 2,973,689

Price Performance (%)

1 M 6 M 1 Yr

Tech Mahindra (8.8) 7.5 8.2

Nifty Index 2.6 11.5 13.5

Source: Bloomberg

6 June 2019

https://www.nirmalbang.com/Upload/Tech%20Mahindra-Analyst%20Meet%20Update-27%20November%202018.pdf

https://www.nirmalbang.com/Upload/Information%20Technology_Sector%20Report%2027%20December%202018.pdf


2 Tech Mahindra

Exhibit 1: Key financials

Y/E March (Rsmn) FY17 FY18 FY19 FY20E FY21E

Revenues 291,408 307,730 347,421 378,190 393,353

YoY (%) 10.0 5.6 12.9 8.9 4.0

Gross Profit 85,747 92,431 113,831 123,325 124,857

% of sales 29.4 30.0 32.8 32.6 31.7

EBIT 32,062 36,321 52,076 55,884 58,538

% of sales 11.0 11.8 15.0 14.8 14.9

PAT 28,136 38,001 42,735 46,680 50,413

YoY (%) (9.7) 35.1 12.5 9.2 8.0

FDEPS 31.7 42.8 48.1 52.6 56.8

RoE (%) 18.3 21.5 21.9 21.2 20.0

RoCE (%) 17.3 17.2 22.8 22.8 21.3

RoIC (%) 26.2 25.8 37.9 41.1 41.6

P/E (x) 23.6 17.5 15.5 14.2 13.2

P/BV (x) 4.0 3.5 3.2 2.8 2.5

Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 2: Change in our estimates

New Old Change (%)

FY19A FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E

INR/USD 69.9 72.0 74.5 69.8 72.0 74.5 0.1 - -

USD Revenues (USD mn) 4,971 5,252 5,281 5,002 5,380 5,272 (0.6) (2.4) 0.2

Revenues (Rsmn) 347,421 378,190 393,353 349,402 387,413 392,662 (0.6) (2.4) 0.2

EBIT (Rsmn) 52,076 55,884 58,538 53,954 58,229 58,554 (3.5) (4.0) (0.0)

EBIT Margin (%) 15.0 14.8 14.9 15.4 15.0 14.9 - - -

PAT (Rsmn) 42,767 46,224 49,957 44,400 49,554 52,312 (3.7) (6.7) (4.5)

EPS (Rs) 48.1 52.6 56.8 50.1 56.2 59.3 (4.0) (6.4) (4.2)


View on Indian IT services sector: We downgraded the Indian IT sector (see our report: Street Is Not Factoring Even A Soft Landing; We Downgrade) on 27 December 2018 based on: (1) Consensus not factoring in significantly softer growth in FY21 as the best demand environment since 2008-09 is largely behind us with corporate capex in both the US and Europe likely to have peaked in 2018. (2) The US BFSI space could witness pressure on margins from a flattened/inverted yield curve and probably a more hostile regulatory environment through a split Congress in the US. (3) Pressure on cost structure because of tariffs levied on imports from China impacting US manufacturers. (4) Front-office capabilities in digital still elusive for Indian IT services players, leading to an inability to tap into the marketing budgets of customers in a material way. The focus has been on the technology-intensive back-end of digital where we believe the field is relatively more crowded. (5) ‘Automation at scale’ in legacy services eating into growth coming in from new services. This is driven by explosive growth in both intelligent and robotic process automation software industry. (6) Factoring in lower Indian rupee or INR depreciation benefits than estimated earlier (Refer: Incorporating New INR Estimate). (7) Capital return to shareholders not being as potent a stock driver as it was earlier as the cash hoard is shrinking after two to three rounds of buyback over the past three years. (8) Talent pressure in the US in new-age services because of a tighter H1-B visa regime. We were planning the downgrade a quarter or two down the road, but the global macro set-up has turned weaker far more quickly than we anticipated, hastening this move. While some of the ‘relative’ factors like investor positioning, valuation, earnings revision momentum - partly the reasons for turning ‘tactically positive in March 2018 - still exist, we believe they are unlikely to carry as much importance with investors as deteriorating fundamentals would over FY19-FY21. While many of our competitors are expecting a better FY20 versus FY19, which we believe is unlikely. We probably had the best macro environment that the industry has seen in the past 10 years in 2018 and incrementally we only see a deterioration which should crimp spending by customers. More importantly, we reiterate our no-industry-growth-in-FY21 call initiated in March 2018. We base this scenario on an explicit expectation of a soft landing in the US (0%-1.5% real GDP growth) in 2020. We believe the consensus is expecting mid-high single-digit revenue growth in FY21 for the industry, implicitly assuming continued robust growth in the US (2%-2.5%). It is our belief that the street will converge with our no-growth expectations over time. Until the market prices in this scenario, we believe technical factors are not likely to hold the sector up. A hard landing (recession) - not our current base case - could lead to single-digit negative growth for the sector. Just as outperformance of the sector in 2018 was driven largely by P/E multiple expansion in the belief that growth is going to accelerate, we believe the downside in 2019 will be driven by P/E multiple deflation as investors begin to re-calibrate growth expectations lower over FY19-FY21. We prefer large-caps over mid-caps. The faster growth shown by select mid-caps is a case of ‘rising tide lifting all boats’, a smaller base and lower exposure to legacy services. But as digital demand shifts from the front to back, we believe that traditional large Indian companies will be in a better position to capture the market. We would advise investors to focus on sustainability and not overpay for a riskier business model - some companies have seen client concentration rising over the past two years.



https://www.nirmalbang.com/Upload/Information%20Technology%20Sector%20Update-7%20January%202019.pdf


3 Tech Mahindra

Exhibit 3: 4QFY19 results table

Y/E March (Rsmn) 4QFY18 3QFY19 4QFY19 YoY (%) QoQ (%) 4QFY19E Dev (%)

Net Sales (USD mn) 1,244 1,261 1,268 1.9 0.5 1,303 (2.7)

Net Sales 80,545 89,437 88,923 10.4 (0.6) 91,828 (3.2)

Direct Cost 54,885 59,845 59,482 8.4 (0.6) 61,048 (2.6)

Gross Margin 25,660 29,592 29,441 14.7 (0.5) 30,780 (4.3)

% of Sales 31.9 33.1 33.1 - - 33.5 -

SG&A 11,541 12,366 13,054 13.1 5.6 12,866 1.5

% of Sales 14.3 13.8 14.7 - - 14.0 -

EBITDA 14,119 17,226 16,387 16.1 (4.9) 17,914 (8.5)

EBITDA Margin (%) 17.5 19.3 18.4 - - 19.5 -

Depreciation & Amortisation 2,986 2,836 2,704 (9.4) (4.7) 3,008 (10.1)

EBIT 11133 14,390 13,683 22.9 (4.9) 14,906 (8.2)

EBIT Margin (%) 13.8 16.1 15.4 - - 16.2 -

Interest 527 358 281 (46.7) (21.5) 333 (15.6)

Other Income 4,513 806 1,671 (63.0) 107.3 1,959 (14.7)

PBT 15,119 14,838 15,073 (0.3) 1.6 16,533 (8.8)

Exceptional Item (as Reported) 0 (132) -272 - - (100) -

Provision for Tax 2,810 2,638 3,535 25.8 34.0 4,051 (12.7)

Effective Tax Rate 18.6 17.8 23.5 - - 24.5 -

Minority share in Profit / Loss 88 (39) 59 (33.0) (251.3) 37 59.5

PAT (Reported) 12,221 12,029 11,325 (7.3) (5.9) 12,419 (8.8)

Exceptional Item (Adj-post Tax) 0 (132) (272) - - (100) -

PAT (Adjusted) 12,221 11,897 11,053 (9.6) (7.1) 12,319 (10.3)

NPM (%) 15.2 13.3 12.4 - - 13.4 -


Exhibit 4: Vertical-based USD QoQ and YoY revenue growth in 4QFY19

Source: Nirmal Bang Institutional Equities Research

Exhibit 5: Geography- based USD QoQ and YoY revenue growth in 4QFY19

Geography Contribution to Revenue Growth-QoQ (%) Growth-YoY (%)

North America 46.4 (1.6) (0.3)

Europe 28.6 (0.5) (1.6)

Rest of World 24.9 5.6 10.3

Total 100.0 0.6 2.0


Verticals Contribution to Revenue (%) Growth-QoQ (%) Growth-YoY (%)

Communication (Telecom) 42.7 4.4 4.6

Manufacturing 20.2 (0.9) 6.6

Technology,media & entertainment 7.5 7.7 4.7

Banking,financial services & insurance 13.1 (1.7) 2.6

Retail, transport & logistics 6.4 (4.0) 5.2

Others 10.2 (9.3) (17.5)

Total 100.0 0.6 2.0


4 Tech Mahindra

4QFY19 analyst call / management meet highlights

Key operating performance: Revenues in 4QFY19 in USD terms increased 0.5% on a QoQ basis and grew 1.9% on a YoY basis. Digital grew ~4% QoQ and accounted for 31% of its revenues in FY19. This is in line with those of most Indian IT services companies. There was strong revenue growth from RoW (which grew 5.6% QoQ and 10.3% YoY in USD terms) particularly, in India (due to smart cities projects), Japan and parts of Africa, because of the ramp-up of deals on the Communication side from APAC geography. Among verticals, there was strong growth in Communication at 4.4% QoQ and 4.6% YoY in USD terms. Technology, Media and Entertainment grew 7.7% QoQ and 4.7% YoY. Apart from this, all verticals de-grew on a QoQ basis. BFSI de-grew by 1.7% and grew 2.6% YoY. Manufacturing was down -0.9% QoQ and is automotive heavy, which is witnessing a slowdown in spending.

Enterprise de-growth: Enterprise de-grew by 2.2% in 4QFY19. The volatility increased because of the higher base in 3QFY19 (due to strength in retail vertical). Some deferrals happened and projects were shifted to 1HFY20. Weakness in Healthcare was also one of the reasons. The management is confident of the pipeline and TCV as the funnel is building up.

Digital: It formed 31% of revenues, up 22% YoY and remains the key strength while legacy was down 2.3% in FY19.

Strong BPO growth: BPO revenues grew 5.2% QoQ and 22.1% YoY in USD terms, in 4QFY19. Most of TML’s BPS work is centered around enhancing Customer experience through RPA, Chat-bots and Social Media Tools. TML says that competition is less in BPO as TCS, Wipro, etc are largely playing on platforms. Similar to IT services, there has been headcount reduction in BPO in 4QFY19. This is partially due to increased sub-contracting on-site and partially, due to an increased focus on digital growth which grew by 41% YoY.

QoQ margin dip: EBITDA margin stood at 18.4%, a dip of 90bps on QoQ basis (against our estimate of 19.5%) and expansion of 90bps on YoY basis. The decline in margins was a result of currency appreciation and one-offs. Gross margin remained flat QoQ and increased 120bps YoY. SG&A costs, as a percentage of sales, increased 90bps QoQ and increased 40bps YoY to 14.7% in 4QFY19. There was a one-off expenditure in SG&A which caused the EBIT margin to dip by 70bps QoQ.TML states that going forward SG&A expenses should likely be in the 14%-14.5% range.

1QFY20 could see margin decline: In 4QFY19, Tech Mahindra’s normalized EBITDA margin is 40 bps higher than the reported margin because of a one-off in SG&A expense and stood at 18.7%-18.8%. The management’s goal is to hold on to the FY19 margin levels. But 1QFY20 margins could be low due to increased H1B visa costs, the Comviva effect and the impact of salary hikes coming together. Going further into FY20, the margins could improve because of the use of automation, higher off-shoring in its portfolio companies and revenue pick up.

Commentary on Communication vertical: The revenues from this vertical accounted for ~42.7% of total revenues. They increased4.4% QoQ and 4.6% on a YoY basis in USD terms. This is the third straight quarter of growth in communication vertical. The management attributed the growth to new deal wins and sounded positive on the trajectory going forward. The deal wins in Communication vertical mostly centred around digital transformation and increasing operational efficiency of telecom companies. The management indicated that M&A among its clients will lead to more work for TML. Work is going to be mainly around migration, integration, business process rationalisation, farming of network assets and providing inventory management support.

Huawei Effect: Because of US authorities going after Chinese Telecom players, there have been questions regarding the future of companies like Huawei and ZTE. TML’s management agrees that ZTE and Huawei will be hurt in the process, but they are hopeful in the long run that things will get settled. TML stated that Huawei is not present in the networks domain in the US, which is where most of its work lies. Also, Huawei is not among Top 20-30 customers of TML which reduces the risk.

High TCV from enterprise business: The TCV declined QoQ from US$440mn in 3QFY19 to US$408mn in 4QFY19. TCV has grown by 33% YoY and broken free from the earlier range of US$275mn-US$350mn.


5 Tech Mahindra

Nature of deal wins: The management stated that deal wins are highly transformational in nature. The offerings are built on pillars such as: (1) Transformation of network infrastructure. (2) Transformation of underlying software architecture. (3) Offerings across enterprise and consumer markets. (4) Transforming and increasing operational efficiency of telecom players. (5) Humungous increase in data consumption. Also, the management stated that deal wins were coming from all geographies and hence it was broad-based growth. Among verticals, Healthcare, Banking, and Retail have a lot of focus on the analytics related to retail customer experience. TML had fairly large deals coming in from verticals, which are not exactly among the top three. So the deal wins were quite broad-based, driven primarily by digital transformation.

DSO decreasing: DSOs decreased to 102 days in 4QFY19 from 107 in 3QFY19. Though down marginally, these are still high as per industry trend. Typically, these have been in the range of 75-90 for its peers. High DSOs were explained by longer credit cycles of telecom clients and the geography mix (RoW being higher) and currency problems to some extent.

Other conference-call/management meet highlights: (1) Attrition rate in 4QFY19 stood at 21%, remained flat vis-à-vis 3QFY19. Management stated that Attrition has come down by 200bps on Quarterly annualized basis and attrition in top talent is much lower than the overall average. TML is giving Wage hikes that are higher than before. It has also introduced a career transformation program to control attrition. (2) In 4QFY19, the company’s employee utilisation level (including trainees) remained flattish and stood at 82% (3) Management stated that a large part of sub-contractor expenses came from hiring onsite because of which the overall hiring has come down in IT services segment. Sub-contractor expenses are currently at a higher than industry level of ~13.3% versus 12% in 3QFY19. (4) Four and two clients were added to >US$20mn and >US$50mn bucket each. The share of Top 5 accounts increased from 22.6% in 3QFY19 to 22.8% in 4QFY19. As per the management, there has been some cut-back from Top clients from US in both manufacturing and Telecom. (5) TML now owns ~10% of Altiostar, down from the previous 20%. This has happened as a new investor has come into the company. This will help take down the losses from this investment in TML.


6 Tech Mahindra

Exhibit 6: Employee utilisation (including trainees) flat in 4QFY19

Exhibit 7: EBIT margin declines in 4QFY19 on the back of one-off SG&A expense

Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 8: BPO headcount is steady Exhibit 9: Revenue contribution in terms of geographies

Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research Exhibit 10: Attrition rate remains high Exhibit 11: TCV of large deals declines QoQ

Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research

75

74

7677

76

7575

74

72

73 74

71

74

7777

77 78 78

77

77

77

8183

84

81 8182

82

65

67

69

71

73

75

77

79

81

83

85

1QF

Y13

2QF

Y13

3QF

Y13

4QF

Y13

1QF

Y14

2QF

Y14

3QF

Y14

4QF

Y14

1QF

Y15

2QF

Y15

3QF

Y15

4QF

Y15

1QF

Y16

2QF

Y16

3QF

Y16

4QF

Y16

1QF

Y17

2QF

Y17

3QF

Y17

4QF

Y17

1QF

Y18

2QF

Y18

3QF

Y18

4QF

Y18

1QF

Y19

2QF

Y19

3QF

Y19

4QF

Y19

(%)

38 37 3836 37

40 3936

33 34 35

30 2932 31 31 29 31 31

27 28 29 31 32 3134 33 33

19 18 19 19 19 19 18 17 18 17 17 18 17 18 17 17 1819 18 19 19 18 18 18 18 19

17 18

12 1214 14 14

12 12 12

8 911

13 14 1315 16 15

0

5

10

15

20

25

30

35

40

45

1Q

FY

13

2Q

FY

13

3Q

FY

13

4Q

FY

13

1Q

FY

14

2Q

FY

14

3Q

FY

14

4Q

FY

14

1Q

FY

15

2Q

FY

15

3Q

FY

15

4Q

FY

15

1Q

FY

16

2Q

FY

16

3Q

FY

16

4Q

FY

16

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

(%)

Gross margin SG&A as % of sales EBIT margin

0

20

40

60

80

100

120

140

1Q

FY

13

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

('000)

S/w Professionals BPO Professionals Sales & Support

0

10

20

30

40

50

60

70

80

90

100

1Q

FY

13

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

(%)

North America Europe Rest of World

14 14

15 15 16

18 19 19 19

20

20

21

21 19

18 17

17 16

17

18

19

20

21

10

12

14

16

18

20

22

1Q

FY

14

2Q

FY

14

3Q

FY

14

4Q

FY

14

1Q

FY

15

2Q

FY

15

3Q

FY

15

4Q

FY

15

1Q

FY

16

2Q

FY

16

3Q

FY

16

4Q

FY

16

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

(%)

190

500

220

270250

270

220175

400

300275

300325325

350325326310298300

270

550

440408

0

100

200

300

400

500

600

1Q

FY

14

2Q

FY

14

3Q

FY

14

4Q

FY

14

1Q

FY

15

2Q

FY

15

3Q

FY

15

4Q

FY

15

1Q

FY

16

2Q

FY

16

3Q

FY

16

4Q

FY

16

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

(US$mn)


7 Tech Mahindra

Exhibit 12: >US$20mn and >US$50mn buckets witnessed addition of clients in 4QFY19


4240

3836

41 40 4044

4745 46

50

14 14 14 14 14 1416 16 16 17 18

20

0

10

20

30

40

50

60

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

20 Million dollar + Clients 50 Million dollar + Clients


8 Tech Mahindra

Exhibit 13: Quarterly snapshot

Year to 31 March (Rsmn) 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19

INR/USD 66.86 67.7 66.47 64.44 64.45 64.35 64.64 67.51 70.68 71.11 70.32

USD Revenue (USD mn) 1,072 1,116 1,131 1,138 1,179 1,209 1,244 1,224 1,218 1,261 1,268

INR Revenue 71,674 75,575 74,950 73,361 76,064 77,760 80,545 82,763 86,298 89,437 88,923

Gross Margin 21,957 23,223 20,165 20,543 22,275 23,953 25,660 25,423 29,375 29,592 29,441

SGA 11,256 11,358 11,178 11,196 11,218 11,306 11,541 11,854 13,189 12,366 13,054

EBITDA 10,701 11,865 8,987 9,347 11,057 12,647 14,119 13,569 16,186 17,226 16,387

Depreciation 2,447 2,480 2,835 2,468 2,653 2,742 2,986 2,808 2,944 2,836 2,704

EBIT 8,254 9,385 6,152 6,879 8,404 9,905 11,133 10,761 13,242 14,390 13,683

Other income (net) 1,387 1,552 2,379 4,106 3,223 2,251 4,513 1,114 1,751 806 1,671

PBT 9,296 10,588 8,213 10,615 11,241 11,815 15,119 11,570 14,472 14,706 14,801

Tax 2,860 2,141 2,552 2,698 2,847 2,570 2,810 2,457 3,914 2,638 3,535

Minority Share in profit/Loss (13) (101) 31 (68) 31 (187) 88 16 84 (39) 59

Exceptional Item (2) 2 - - - - 0 (118) (133) (132) (272)

PAT Adjusted for exceptional items 6,448 8,548 5,630 7,985 8,363 9,432 12,221 9,072 10,438 12,083 11,142

YOY Growth (%)

USD Revenue 6.1 10.0 10.6 10.3 10.0 8.3 10.0 7.6 3.3 4.3 1.9

INR Revenue 8.3 12.8 8.9 6.0 6.1 2.9 7.5 12.8 13.5 15.0 10.4

Gross Profit 3.6 10.9 (4.2) 0.7 1.4 3.1 27.3 23.8 31.9 23.5 14.7

EBITDA (2.8) 4.5 (22.6) (9.2) 3.3 6.6 57.1 45.2 46.4 36.2 16.1

EBIT (8.7) (2.5) (34.8) (16.8) 1.8 5.5 81.0 56.4 57.6 45.3 22.9

Net Profit (17.9) 12.6 (37.2) 6.6 29.7 10.3 117.1 12.4 23.7 27.0 (10.5)

QoQ Growth (%)

USD Revenue 4.0 4.1 1.4 0.6 3.6 2.5 2.9 (1.6) (0.48) 3.5 0.5

INR Revenue 3.6 5.4 (0.8) (2.1) 3.7 2.2 3.6 2.8 4.3 3.6 (0.6)

EBITDA 4.0 10.9 (24.3) 4.0 18.3 14.4 11.6 (3.9) 19.3 6.4 (4.9)

EBIT (0.2) 13.7 (34.4) 11.8 22.2 17.9 12.4 (3.3) 23.1 8.7 (4.9)

Net Profit (13.9) 32.6 (34.2) 41.8 4.7 12.8 29.6 (26.5) 15.2 15.8 (8.7)

Margins (%)

Gross Margin 30.6 30.7 26.9 28.0 29.3 30.8 31.9 30.7 34.0 33.1 33.1

EBITDA 14.9 15.7 12.0 12.7 14.5 16.3 17.5 16.4 18.8 19.3 18.4

EBIT 11.5 12.4 8.2 9.4 11.0 12.7 13.8 13.0 15.3 16.1 15.4

PAT 9.0 11.3 7.5 10.9 11.0 12.1 15.2 10.8 12.0 13.4 12.3

SGA 15.7 15.0 14.9 15.3 14.7 14.5 14.3 14.3 15.3 13.8 14.7



9 Tech Mahindra

Exhibit 14: Key metrics

Key Metrics 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19

P and L (Rsmn)

Revenue 68,837 69,209 71,674 75,575 74,950 73,361 76,064 77,760 80,545 82,763 86,298 89,437 88,923

EBITDA 11,613 10,290 10,701 11,865 8,987 9,347 11,057 12,647 14,119 13,569 16,186 17,226 16,387

PAT 8,971 7,492 6,447 8,550 5,630 7,985 8,363 9,432 12,221 8,979 10,341 11,975 10,935

Vertical Mix (%)

Communication (Telecom) 50.9 49.2 48.4 47.3 46.3 45.2 43.7 42.8 41.6 39.6 41.5 41.1 42.7

Manufacturing 17.1 18.1 19.2 18.4 19.2 19.3 19.0 19.1 19.3 20.1 20.1 20.5 20.2

Technology,media & entertainment 7.5 7.5 7.2 6.4 6.2 6.0 5.9 6.5 7.3 7.2 7.3 7.0 7.5

Banking,financial services & insurance 10.6 11.3 11.5 13.1 14.1 14.4 14.1 13.3 13.0 13.6 13.5 13.4 13.1

Retail, transport & logistics 6.2 6.5 6.8 7.6 6.5 6.8 7.2 7.1 6.2 6.1 6.5 6.7 6.4

Others 7.7 7.4 6.8 7.1 7.7 8.3 9.9 11.3 12.6 13.4 11.2 11.3 10.2

Geographical Mix (%)

North America 46.8 49.0 48.3 46.7 45.1 46.8 45.3 46.9 47.4 48.2 47.0 47.4 46.4

Europe 28.5 28.3 29.7 29.4 29.6 29.8 30.0 29.8 29.6 30.0 29.6 28.9 28.6

Rest of World 24.7 22.8 22.0 23.9 25.3 23.4 24.7 23.3 23.0 21.9 23.4 23.7 24.9

Delivery (%)

Onsite 63.2 63.4 63.5 63.9 64.3 63.7 64.1 65.8 67.0 66.6 64.5 65.5 65.2

Offshore 36.8 36.6 36.5 36.1 35.7 36.3 35.9 34.2 33.0 33.4 35.5 34.5 34.8

Utilization (%) (including trainees) 77 78 78 77 77 77 81 83 84 81 81 82 82

Clients Concentration (%)

Top 5 Clients 27.9 28.8 28.5 27.8 26.6 25.9 24.8 23.2 23.2 21.9 23.3 22.6 22.8

Top 10 Clients 39.0 40.0 39.9 38.4 37.6 36.3 35.1 33.2 32.7 32.5 32.7 31.6 32.0

Top 20 Clients 51.9 52.6 51.7 50.5 49.0 48.5 46.2 45.0 45.7 46.2 45.6 44.0 45.1

Number of Client

1 USD mn + 319 317 341 356 354 377 390 389 392 396 407 416 425

5 USD mn + 112 120 120 128 134 139 147 154 156 154 157 157 156

10 USD mn + 63 64 66 65 71 74 81 83 85 86 86 88 83

20 USD mn + 40 42 40 38 36 41 40 40 44 47 45 46 50

50 USD mn + 14 14 14 14 14 14 14 16 16 16 17 18 20

Employees 105,432 107,216 112,886 117,095 117,693 115,980 117,225 115,241 112,807 113,552 118,391 121,842 121,082

Attrition (%) 21 21 19 18 17 17 16 17 18 19 20 21 21

Financial Metrics (USD mn)

Revenue 1023 1032 1072 1116 1131 1138 1179 1209 1244 1224 1218 1261 1268

EBITDA 173 153 160 175 137 145 171 197 217 200 227 245 235

EBIT 141 123 124 138 94 107 130 154 171 158 185 205 196

PAT 138 119 96 125 89 123 130 144 189 134 150 174 165

Per Capita (Annualised) - USD

Revenue 38,797 38,483 37,999 38,126 38,446 39,252 40,237 41,968 44,121 43,120 41,159 41,391 41,872

EBITDA 6,579 5,723 5,680 5,978 4,646 4,994 5,835 6,838 7,702 7,031 7,663 8,033 7,757

EBIT 5,353 4,600 4,383 4,728 3,191 3,673 4,433 5,356 6,067 5,569 6,257 6,727 6,485

PAT 5,220 4,425 3,412 4,260 3,038 4,235 4,422 5,002 6,716 4,713 5,068 5,699 5,457



10 Tech Mahindra

Exhibit 15:YoY and QoQ growth of various parameters

QoQ Growth (%) 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19

By Geography (%)

North America (0.9) 5.6 4.8 (1.9) (1.3) 5.6 2.5 0.6 (2.1) 4.4 0.3 6.2 4.0 0.0 (3.0) 4.4 (1.6)

Europe 1.0 (0.8) 1.9 (1.0) (0.6) 0.2 9.1 3.0 2.0 1.3 4.3 1.9 2.2 (0.3) (1.8) 1.0 (0.5)

Rest of World 33.4 (7.2) (2.2) 6.3 7.3 (6.9) 0.3 13.1 7.3 (6.9) 9.4 (3.3) 1.6 (6.3) 6.3 4.8 5.6

By Industry (%)

Communication (Telecom) 15.7 (4.2) 2.6 (2.7) (0.0) (2.5) 2.3 1.7 (0.8) (1.8) 0.2 0.4 0.0 (6.4) 4.3 2.5 4.4

Manufacturing (10.8) 4.2 (0.2) 2.8 0.8 6.8 10.3 (0.3) 5.8 1.1 2.0 3.1 4.0 2.5 (0.5) 5.6 (0.9)

Technology,media & entertainment 2.1 4.8 14.8 (9.4) 2.1 0.9 (0.2) (7.5) (1.8) (2.6) 1.9 13.0 15.6 (3.0) 0.9 (0.8) 7.7

Banking,financial services & insurance

(1.1) 10.4 (1.9) 2.5 9.0 7.5 5.8 18.6 9.1 2.8 1.5 (3.3) 0.6 2.9 (1.2) 2.7 (1.7)

Retail, transport & logistics 3.1 5.4 (5.6) 13.7 (8.1) 5.8 8.8 16.3 (13.3) 5.3 9.7 1.1 (10.1) (3.2) 6.0 6.7 (4.0)

Others 6.5 8.9 3.8 15.6 2.1 (3.1) (4.5) 8.7 9.9 8.4 23.6 17.0 14.8 4.6 (16.8) 4.4 (9.3)

By Client classification (%)

Top 5 Clients (5.0) 0.5 (0.9) (12.2) 0.4 4.1 2.9 1.5 (3.0) (2.0) (0.8) (4.1) 2.9 (7.1) 5.9 0.4 1.4

Top 10 Clients (2.2) (1.7) (0.1) (6.6) (1.7) 3.5 3.7 0.2 (0.8) (2.9) 0.2 (3.0) 1.4 (2.2) 0.1 0.0 1.8

Top 20 Clients (0.5) 0.5 0.4 (6.8) 0.6 2.2 2.2 1.7 (1.7) (0.4) (1.3) (0.1) 4.5 (0.5) (1.8) (0.1) 3.0

YoY Growth (%)

By Geography (%)

North America 20.3 17.9 11.9 7.5 7.1 7.1 4.8 7.5 6.6 5.4 3.1 8.8 15.6 10.8 7.2 5.4 (0.3)

Europe 16.2 9.3 5.5 1.0 (0.6) 0.4 7.5 11.9 14.9 16.2 11.1 9.8 10.0 8.3 1.9 1.1 (1.6)

Rest of World 21.2 19.8 24.3 28.6 3.5 3.8 6.6 13.3 13.3 13.2 23.5 5.6 (0.0) 0.7 (2.1) 6.1 10.3

By Industry (%)

Communication (Telecom) 29.9 20.2 14.3 10.6 (4.4) (2.6) (3.0) 1.4 0.6 1.4 (0.7) (2.0) (1.2) (5.8) (1.9) 0.1 4.6

Manufacturing 6.4 11.1 6.0 (4.7) 7.7 10.4 22.0 18.4 24.2 17.6 8.8 12.5 10.6 12.0 9.3 11.9 6.6

Technology,media & entertainment (2.9) (5.1) 11.0 11.3 11.3 7.1 (6.9) (4.9) (8.6) (11.7) (9.9) 10.0 29.5 29.1 27.8 12.3 4.7

Banking,financial services & insurance

7.5 12.3 11.2 9.8 21.0 17.8 27.1 47.0 47.1 40.6 34.8 10.0 1.4 1.6 (1.1) 5.1 2.6

Retail, transport & logistics 15.6 19.3 8.7 16.6 3.9 4.3 20.2 22.9 16.0 15.4 16.4 1.2 4.9 (3.5) (6.7) (1.6) 5.2

Others 27.8 25.3 21.6 39.1 33.4 18.7 9.3 2.8 10.6 23.8 60.1 72.4 80.0 73.6 16.9 4.3 (17.5)

By Client classification (%)

Top 5 Clients 9.3 3.2 (10.1) (16.9) (12.1) (9.0) (5.5) 9.2 5.5 (0.8) (4.3) (9.6) (4.1) (9.1) (2.9) 1.6 0.1

Top 10 Clients 11.8 1.8 (5.3) (10.4) (9.9) (5.2) (1.6) 5.6 6.6 0.1 (3.3) (6.3) (4.3) (3.7) (3.8) (0.7) (0.3)

Top 20 Clients 11.5 6.3 (0.1) (6.4) (5.4) (3.8) (2.1) 6.8 4.4 1.7 (1.7) (3.5) 2.6 2.5 2.0 2.0 0.5



11 Tech Mahindra

Exhibit 16: P/E charts



Exhibit 17:P/E premium/ (discount) to TCS


0

200

400

600

800

1,000

1,200

Jun-

11

Sep

-11

Jan-

12

Apr

-12

Aug

-12

Nov

-12

Mar

-13

Jul-1

3

Oct

-13

Feb

-14

May

-14

Sep

-14

Dec

-14

Apr

-15

Jul-1

5

Nov

-15

Feb

-16

Jun-

16

Oct

-16

Jan-

17

May

-17

Aug

-17

Dec

-17

Mar

-18

Jul-1

8

Oct

-18

Feb

-19

May

-19

(Rs)

Price 5 10 15 20

0

5

10

15

20

25

Jun

-11

Se

p-1

1

Jan

-12

Ap

r-1

2

Au

g-1

2

No

v-1

2

Ma

r-1

3

Jul-1

3

Oct

-13

Fe

b-1

4

Ma

y-1

4

Se

p-1

4

De

c-1

4

Ap

r-1

5

Jul-1

5

No

v-1

5

Fe

b-1

6

Jun

-16

Oct

-16

Jan

-17

Ma

y-1

7

Au

g-1

7

De

c-1

7

Ma

r-1

8

Jul-1

8

Oct

-18

Fe

b-1

9

Ma

y-1

9

(x)

P/E Mean 1sd (1)sd

(80)

(70)

(60)

(50)

(40)

(30)

(20)

(10)

0

10

Nov

-13

Feb

-14

May

-14

Aug

-14

Dec

-14

Mar

-15

Jun-

15

Oct

-15

Jan-

16

Apr

-16

Aug

-16

Nov

-16

Feb

-17

Jun-

17

Sep

-17

Dec

-17

Apr

-18

Jul-1

8

Oct

-18

Feb

-19

May

-19

Tech Mahindra 1 Yr Forward PE Discount to TCS -40

(x)


12 Tech Mahindra

Exhibit 18: Comparative valuation

TCS Infosys Wipro HCL Tech Tech Mahindra Mindtree Persistent

Year Ending March March March March March March March

Prices as on 04-Jun-19 2,183 735 294 1,086 748 972 594

Currency INR INR INR INR INR INR INR

Market Value (Rsbn) 8,358 3,196 1,451 1,472 660 161 48

(US$mn) 116,086 44,389 20,146 20,450 9,163 2,234 660

March 2020 Target Price 1,614 601 219 1,090 562 563 558

Upside/(downside) -26.1% -18.3% -25.5% 0.3% -24.9% -42.0% -6.1%

Recommendation Sell Sell Sell Accumulate Sell Sell Sell

FDEPS (Rs)

FY18 67.0 32.5 16.8 62.9 42.8 34.6 40.4

FY19E 83.1 36.0 18.6 73.5 48.1 45.8 44.1

FY20E 93.4 38.9 18.4 83.6 52.6 53.5 54.4

FY21E 97.8 40.4 19.0 88.0 56.8 56.9 56.4

PE (x)

FY18 32.6 22.6 17.5 17.3 17.5 28.1 14.7

FY19E 26.3 20.4 15.8 14.8 15.5 21.2 13.5

FY20E 23.4 18.9 16.0 13.0 14.2 18.2 10.9

FY21E 22.3 18.2 15.5 12.3 13.2 17.1 10.5

EV/EBITDA (x)

FY18 23.6 16.1 14.3 12.7 12.8 20.2 10.4

FY19E 19.1 14.6 11.5 10.5 9.0 14.0 7.6

FY20E 18.0 13.5 9.7 9.1 8.2 11.3 6.5

FY21E 17.3 12.9 9.2 8.5 7.5 10.6 5.8

EV/Sales (x)

FY18 6.2 4.3 2.7 2.9 2.0 2.7 1.6

FY19E 5.2 3.7 2.3 2.4 1.6 2.1 1.3

FY20E 4.7 3.4 2.0 2.2 1.5 1.8 1.1

FY21E 4.5 3.2 1.9 2.0 1.3 1.7 1.0

Pre Tax ROIC (%)

FY18 57.3 44.9 24.5 38.9 25.8 32.9 29.7

FY19E 61.8 47.5 30.4 36.3 37.9 46.4 44.2

FY20E 59.4 49.4 37.0 32.4 41.1 49.2 52.5

FY21E 58.9 48.2 36.8 29.7 41.6 49.1 54.0

Source: Bloomberg, Nirmal Bang Institutional Equities Research


13 Tech Mahindra

Financials

Exhibit 19: Income statement


Average INR/USD 67.0 64.5 69.9 72.0 74.5

Net Sales (US$m) 4,351 4,771 4,971 5,252 5,281

-Growth (%) 7.8 9.6 4.2 5.7 0.5

Net Sales 291,408 307,730 347,421 378,190 393,353

-Growth (%) 10.0 5.6 12.9 8.9 4.0

Cost of Sales & Services 205,661 215,299 233,590 254,865 268,495

Gross Profit 85,747 92,431 113,831 123,325 124,857

% of sales 29.4 30.0 32.8 32.6 31.7

SG& A 43,904 45,261 50,463 55,536 55,950

% of sales 15.1 14.7 14.5 14.7 14.2

EBITDA 41,843 47,170 63,368 67,789 68,907

% of sales 14.4 15.3 18.2 17.9 17.5

Depreciation 9,781 10,849 11,292 11,906 10,369

% of sales 3.4 3.5 3.3 3.1 2.6

EBIT 32,062 36,321 52,076 55,884 58,538

% of sales 11.0 11.8 15.0 14.8 14.9

Interest expenses 1,286 1,624 1,332 848 489

Other income (net) 7,776 14,093 5,342 6,733 8,632

PBT 38,552 48,790 56,086 61,768 66,681

-PBT margin (%) 13.2 15.9 16.1 16.3 17.0

Provision for tax 10,021 10,925 12,544 14,824 16,003

Effective tax rate (%) 26.0 22.4 22.4 24.0 24.0

Minority Interest 389 (136) 120 120 120

Net profit 28,119 38,001 42,767 46,224 49,957

-Growth (%) (9.8) 35.1 12.5 8.1 8.1

-Net profit margin (%) 9.6 12.3 12.3 12.2 12.7


Exhibit 21: Balance sheet


Equity capital 4,388 4,417 4,437 4,437 4,437

Reserves & surplus 159,984 184,011 198,407 228,749 261,517

Net worth 164,372 188,428 202,844 233,186 265,954

Minority Interest 4,641 5,091 4,777 4,777 4,777

Other liabilities 18,905 18,246 18,441 18,441 18,441

Total loans 8,818 13,440 5,095 3,095 2,086

Total liabilities 196,736 225,205 231,157 259,499 291,258

Goodwill 26,279 27,727 28,163 28,163 28,163

Net block (incl. CWIP) 42,051 50,896 45,212 38,906 34,137

Investments 6,802 15,116 12,050 12,050 12,050

Deferred tax asset - net 2,674 5,766 6,091 6,091 6,091

Other non-current assets 19,594 23,797 26,934 29,615 30,041

Other current assets 21,571 19,623 26,770 27,377 27,771

Debtors 53,377 64,979 69,586 78,219 79,346

Loans & Advances 33,608 30,917 29,425 36,176 36,697

Cash & bank balance 54,098 64,892 89,486 104,812 140,351

Inventory 611 659 752 752 752

Total current assets 163,265 181,070 216,019 247,336 284,917

Total current liabilities 63,929 79,167 103,312 102,662 104,141

Net current assets 99,336 101,903 112,707 144,674 180,776

Total assets 196,736 225,205 231,157 259,499 291,258


Exhibit 20: Cash flow


EBIT 32,062 36,321 52,076 55,884 58,538

(Inc.)/dec. in working capital (9,120) 8,227 13,790 (16,640) (564)

Cash flow from operations 22,942 44,548 65,866 39,243 57,974

Other income 7,776 14,093 5,342 6,733 8,632

Depreciation & amortisation 9,781 10,849 11,292 11,906 10,369

Financial expenses (1,286) (1,624) (1,332) (848) (489)

Tax paid (10,021) (10,925) (12,544) (14,824) (16,003)

Dividends paid (9,048) (14,835) (14,900) (19,605) (21,174)

Net cash from operations 20,144 42,106 53,724 22,604 39,310

Capital expenditure (19,449) (21,142) (5,608) (5,600) (5,600)

Net cash after capex 695 20,964 48,116 17,004 33,710

Inc./(dec.) in debt (145) 3,963 (8,150) (2,000) (1,009)

(Inc.)/dec. in investments 18,498 (15,609) (396) (2,681) (427)

Equity issue/(buyback) (451) 29 (19,560) - -

Cash from financial activities 17,903 (11,617) (28,106) (4,681) (1,436)

Others (4,637) 1,447 4,584 3,004 3,265

Opening cash 40,138 54,098 64,892 89,486 104,812

Closing cash 54,098 64,892 89,486 104,813 140,351

Change in cash 13,960 10,794 24,594 15,327 35,539


Exhibit 22: Key ratios

Y/E March FY17 FY18 FY19 FY20E FY21E

Per Share (Rs)

FDEPS 31.7 42.8 48.1 52.6 56.8

Dividend Per Share 8.6 14.2 17.1 18.7 20.2

Dividend Yield (%) 1.2 1.9 2.3 2.5 2.7

Book Value 188 216 232 267 305

Dividend Payout Ratio (%. Incl DDT) 32.2 39.0 34.8 42.4 42.4

Return ratios (%)

RoE 18.3 21.5 21.9 21.2 20.0

RoCE 17.3 17.2 22.8 22.8 21.3

RoIC 26.2 25.8 37.9 41.1 41.6

Turnover Ratios

Asset Turnover 1.1 1.0 1.0 1.0 1.0

Debtor Days 67 77 73 75 74

Working Capital Cycle Days 57 44 24 38 38

Valuation ratios (x)

P/E 23.6 17.5 15.5 14.2 13.2

P/BV 4.0 3.5 3.2 2.8 2.5

EV/EBITDA 14.6 12.8 9.0 8.2 7.5

EV/Sales 2.1 2.0 1.6 1.5 1.3

M-cap/Sales 2.2 2.1 1.9 1.7 1.7



14 Tech Mahindra

Rating track Date Rating Market price (Rs) Target price (Rs)

13 April 2015 Sell 660 593

28 May 2015 Sell 549 511

19 June 2015 Sell 541 470

28 July 2015 Sell 520 470

28 September 2015 Sell 567 474

4 November 2015 Sell 557 472

15 December 2015 Sell 543 471

8 January 2016 Under Review 522 -

2 February 2016 Under Review 497 -

14 March 2016 Sell 459 395

25 May 2016 Sell 480 409

21 June 2016 Sell 544 421

3 August 2016 Sell 499 400

28 October 2016 Sell 414 385

10 January 2017 Sell 473 368

31 January 2017 Sell 472 383

14 February 2017 Sell 500 388

7 March 2017 Sell 501 408

29 May 2017 Sell 429 403

21 June 2017 Sell 395 367

1 August 2017 Sell 385 360

28 September 2017 Sell 447 358

2 November 2017 Sell 478 387


26 December 2017 Under Review 493 -

30 January 2018 Under Review 605 -

17 March 2018 Accumulate 635 608

28 May 2018 Accumulate 703 721

3 July 2018 Accumulate 655 716

31 July 2018 Accumulate 658 718

5 October 2018 Buy 696 845

31 October 2018 Accumulate 685 731

27 November 2018 Accumulate 695 731


7 January 2019 Sell 681 525

6 February 2019 Sell 751 561

19 March 2019 Sell 789 587

6 June 2019 Sell 750 562

Rating track graph

350

450

550

650

750

850

Ap

r-1

5

Ma

y-1

5

Jul-1

5

Se

p-1

5

No

v-1

5

Jan

-16

Ma

r-1

6

Ma

y-1

6

Jul-1

6

Se

p-1

6

No

v-1

6

Jan

-17

Ma

r-1

7

Ma

y-1

7

Jul-1

7

Se

p-1

7

No

v-1

7

Jan

-18

Ma

r-1

8

Ma

y-1

8

Jul-1

8

Se

p-1

8

No

v-1

8

Jan

-19

Ma

r-1

9

Ma

y-1

9

Not Covered Covered


15 Tech Mahindra

DISCLOSURES

This Report is published by Nirmal Bang Equities Private Limited (hereinafter referred to as “NBEPL”) for private circulation. NBEPL is a registered Research Analyst under SEBI (Research Analyst) Regulations, 2014 having Registration no. INH000001436. NBEPL is also a registered Stock Broker with National Stock Exchange of India Limited and BSE Limited in cash and derivatives segments. NBEPL has other business divisions with independent research teams separated by Chinese walls, and therefore may, at times, have different or contrary views on stocks and markets. NBEPL or its associates have not been debarred / suspended by SEBI or any other regulatory authority for accessing / dealing in securities Market. NBEPL, its associates or analyst or his relatives do not hold any financial interest in the subject company. NBEPL or its associates or Analyst do not have any conflict or material conflict of interest at the time of publication of the research report with the subject company. NBEPL or its associates or Analyst or his relatives do not hold beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of this research report. NBEPL or its associates / analyst has not received any compensation / managed or co-managed public offering of securities of the company covered by Analyst during the past twelve months. NBEPL or its associates have not received any compensation or other benefits from the company covered by Analyst or third party in connection with the research report. Analyst has not served as an officer, director or employee of Subject Company and NBEPL / analyst has not been engaged in market making activity of the subject company. Analyst Certification: I, Girish Pai, research analyst, is the author of this report, hereby certifies that the views expressed in this research report accurately reflects my personal views about the subject securities, issuers, products, sectors or industries. It is also certified that no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. The analyst(s) principally responsible for the preparation of this research report and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations.


16 Tech Mahindra

Disclaimer

Stock Ratings Absolute Returns

BUY > 15%

ACCUMULATE -5% to15%

SELL < -5%

This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. NBEPL is not soliciting any action based upon it. Nothing in this research shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any such transaction. In preparing this research, we did not take into account the investment objectives, financial situation and particular needs of the reader.

This research has been prepared for the general use of the clients of NBEPL and must not be copied, either in whole or in part, or distributed or redistributed to any other person in any form. If you are not the intended recipient you must not use or disclose the information in this research in any way. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. NBEPL will not treat recipients as customers by virtue of their receiving this report. This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject NBEPL & its group companies to registration or licensing requirements within such jurisdictions.

The report is based on the information obtained from sources believed to be reliable, but we do not make any representation or warranty that it is accurate, complete or up-to-date and it should not be relied upon as such. We accept no obligation to correct or update the information or opinions in it. NBEPL or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. NBEPL or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations.

This information is subject to change without any prior notice. NBEPL reserves its absolute discretion and right to make or refrain from making modifications and alterations to this statement from time to time. Nevertheless, NBEPL is committed to providing independent and transparent recommendations to its clients, and would be happy to provide information in response to specific client queries.

Before making an investment decision on the basis of this research, the reader needs to consider, with or without the assistance of an adviser, whether the advice is appropriate in light of their particular investment needs, objectives and financial circumstances. There are risks involved in securities trading. The price of securities can and does fluctuate, and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. Opinions expressed are subject to change without any notice. Neither the company nor the director or the employees of NBEPL accept any liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this research and/or further communication in relation to this research. Here it may be noted that neither NBEPL, nor its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profit that may arise from or in connection with the use of the information contained in this report.

Copyright of this document vests exclusively with NBEPL.

Our reports are also available on our website www.nirmalbang.com

Access all our reports on Bloomberg, Thomson Reuters and Factset.

Team Details:

Name Email Id Direct Line

Rahul Arora CEO [email protected] -

Girish Pai Head of Research [email protected] +91 22 6273 8017 / 18

Dealing

Ravi Jagtiani Dealing Desk [email protected] +91 22 6273 8230, +91 22 6636 8833

Pradeep Kasat Dealing Desk [email protected] +91 22 6273 8100/8101, +91 22 6636 8831

Michael Pillai Dealing Desk [email protected] +91 22 6273 8102/8103, +91 22 6636 8830

Nirmal Bang Equities Pvt. Ltd.

Correspondence Address

B-2, 301/302, Marathon Innova,

Nr. Peninsula Corporate Park,

Lower Parel (W), Mumbai-400013.

Board No. : 91 22 6273 8000/1; Fax. : 022 6273 8010

http://www.nirmalbang.com/

Documents

Institutional EquitiesOEMs like Ericsson, Huawei, Nokia, ZTE, Samsung, etc. With Huawei and ZTE facing resistance in equipment ... by explosive growth in both intelligent and robotic