Company Profile: Tech Mahindra is part of approx the Rs. 84,700 Cr. Mahindra Group and is a provider of IT Services, Networking Technology Solutions and Business Support Services to the global telecommunications industry. Tech Mahindra expanded its IT portfolio in 2009 by acquiring the leading global business and information technology services company, Mahindra Satyam. Tech Mahindra’s capabilities spread across a broad spectrum, including business support systems (BSS), operations support systems (OSS), network design & engineering, next generation networks, mobility solutions, security consulting and testing. It has operations in more than 31 countries with 17 sales offices and 15 delivery centers.
Area of Business – IT, Solution & Services, outsourcing, Communication, digital transformation, consulting and business re-engineering
Growth in IT exports revenue: The total Indian IT exports revenue is expected to increase from USD 69 billion in FY12 to USD 98 billion in 2015, registering a CAGR of 13.2%.
Diversification across service lines and client concentration:
Reduced dependence on Europe: 45% of revenues of Tech Mahindra come from Europe. The current uncertain macro environment prevailing in Europe does not bode well for the company. Merger is expected to reduce its dependency on Europe as it generates approx. 50% of its business from the Americas. The share of revenue from Europe in the merged entity is expected to come down from ~45% to 33%.
Growth in emerging markets: Compared to the subdues growth expected in developed markets, emerging markets are expected to drive relatively higher growth due to new spectrum licensing, migration to DTH platforms, broadband penetration, focus on value added services and conducive regulatory environment.
Projects- Tech Mahindra seeks to be the heading Indian Based System Integrator in Korea by 2017. The organization accepts that limitation is the way to accomplish this target and arrangements to run as a nearby Korean organization in association with a Korean combination. Feasible arrangements in an offer to stretch its European conveyance foot shaped impression Tech Mahindra supposedly wants to situate up new 200-seater focus in Hungary. In this respect, the organization has recognized the capital city of Budapest to give IT help to an extending customer base in Eastern Europe. The organization has officially secured a stay client for its Budapest focus.
In the first round of employing, 50 new employments will be made at the core. The choice to setup the inside was likewise supported by the tax cuts that Tech Mahindra got from the government. For the last few quarters, the IT house has been increasing its occurrence in Europe, which represents around 31% of the organization's income. Business in Europe developed by around 5% consecutively in the quarter closed June 30, 2014.
Conclusion: The Company is fundamentally very strong and has a global presence particularly in Europe, US and Asian countries with diversified business operations across the world. We recommend a “BUY” on the stock with a target price of Rs 2760, assuming an up its Q2FY15E earnings, an upside of 20%, a period of 3-4 months.
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