Why Tech Mahindra shares rose 10% in spite of a drop in Q4 profits is explained

Following the company’s release of its Q4 earnings on Friday, Tech Mahindra shares had their largest intraday increase in over eight years.

Despite a 41% year-over-year (YoY) fall in net profit to Rs 661 crore, the company’s shares rose. Furthermore, the quarter’s operating revenue decreased 6.2% YoY to Rs 12,871.30 million.

This comes as a result of Mohit Joshi, the CEO and MD of Tech Mahindra, revealing a three-year turnaround plan to address the company’s sluggish development. By FY27, the goal is to outperform peers in terms of revenue growth and maximize margin improvement.

It should be mentioned that Tech Mahindra’s stock has increased by more than 3% in the last month after declining somewhat since the year’s beginning.

Tech Mahindra’s strategy for recovery
Joshi presented a staged turnaround strategy that matched the fiscal year.

Tech Mahindra is set to embark on a ‘turnaround phase’ in FY25, with a primary focus on creating the new organization. He said that investments in important markets, service lines, and accounts would get more attention. Focus areas will also include the integration of front-end portfolio firms and an enhanced program for major account development. At this point, Project Fortius will also be launched with the goal of cost minimization.

Joshi also presented his “Vision 2027,” which included strategic investments, gradual business advancements, and organizational reorganization as top goals.

Furthermore, emphasis will be placed on using synergies with other Mahindra Group companies. The business also introduced Project Fortius, a three-year initiative designed to increase margins by having managers use a variety of tactics.

Tech Mahindra is scheduled to commence the ‘Stabilization Phase’ in FY26. The company aims to sustain its investment pace and achieve cost reductions by progressing Project Fortius.

The firm expects to profit from improved long-term structural alignment and continuous pyramid improvement by FY27, when it will reach the ‘Reaping Returns’ phase.

Additionally, Tech Mahindra is going to put more attention into growing its manufacturing, BFSI, telecom, and AI sectors.

The firm wants to outperform peer average topline growth among the top six and seven IT services providers and increase its EBIT margin to 15% by FY27.

On the Bombay Stock Exchange (BSE), the company’s shares were trading 9.15% higher at Rs 1,299 at 10:44 a.m.