Tech Mahindra Q2 profit up 5.6% to Rs 1,124 cr; company to acquire US-based Born Group

New Delhi: IT firm Tech Mahindra on Tuesday posted a 5.6 percent rise in consolidated net profit at Rs 1,124 crore for the September quarter, helped by deal wins of $1.49 billion in the quarter. The company also announced that it will acquire US-based Born Group at an enterprise value of $95 million (approximately Rs 671 crore), a move aimed at enhancing its consulting capabilities through the addition of creative and design skills, technology and analytics platforms and commerce expertise. The Mumbai-based company had registered a net profit of Rs 1,064.3 crore in the July-September 2018 quarter. Its revenue from operations grew 5.1 percent to Rs 9,070 crore in the quarter under review from Rs 8,629.8 crore in the year-ago period. [caption id=“attachment_2264826” align=“alignleft” width=“380”] Representative image. Reuters[/caption] “We are thankful to our customers for believing in our capabilities despite a tough demand environment. Our consistent large deal wins is a testimony of our differentiation in the marketplace,” Tech Mahindra Managing Director and CEO C P Gurnani said. He added that the company is confident of its growth outlook for both communications and enterprise businesses. In the second quarter, the company’s deal wins were at a record high of $1.49 billion. The company said it also received a tax refund in the September 2019 quarter - which is a one-time event that lowered its effective tax rate, and therefore, increased its net profit. During the quarter, the company signed a multi-year agreement with AT&T to expand strategic collaboration accelerating the latter’s IT network transformation, shared services modernisation and movement to the cloud. In dollar terms, the company’s profit was at $158.6 million, while revenue was $1.28 billion in the September 2019 quarter. Digital revenues were 39 percent of the revenues, and grew 11.8 percent quarter-on-quarter. “Digital continues to be a strong growth driver as we help our customers in their transformation journey,” he said. The company’s headcount stood at 131,522 people, up 5,749 quarter-on-quarter. Tech Mahindra Chief Financial Officer Manoj Bhat said the company have witnessed a broad-based growth across geographies and customers. “We continue to focus on margin improvement, while transitioning some of the large deals in a volatile macroeconomic environment,” he added. Tech Mahindra said its board has approved the proposal to acquire 100 percent stake in Born Group Pte Ltd, directly and indirectly through its wholly-owned subsidiary - Tech Mahindra (Singapore) Pte Ltd. “The enterprise value is $95 million. $25 million will be paid out linked to the achievement of financial targets for the financial year ending 31 December, 2019,” it said. The cash transaction is expected to close by 15 November, 2019. Headquartered in New York City, Born Group is the largest independent, integrated agency for strategy, creative content and commerce offerings with strong technology capabilities. It has offices in London, Singapore, Hong Kong and India, and has over 1,100 employees. “The acquisition will enhance Tech Mahindra’s transformation consulting capabilities through the addition of creative and design skills, technology and analytics platforms and commerce expertise,” it said. Tech Mahindra will acquire the Indian subsidiary of Born Group - Born Commerce Pvt Ltd. Tech Mahindra (Singapore) Pte Ltd will acquire all the other legal entities of Born Group, it added. The entity was incorporated in 2014. Its turnover was $50 million in 2018.