IT services company Tech Mahindra said that the company expects sluggish growth in the third quarter of FY 2024 after witnessing back-to-back weak demand growth in the last two quarters.
Managing Director and CEO Designate, Mohit Joshi said that while the pipeline is strong and deal conversions are better it doesn’t expect a dramatic improvement in revenue trends in the second half.
“...we don't see a revenue cycle improvement happening in the second half..which is dramatic from where we are in the first half,” said Joshi.
As a result, Joshi said he expects the third quarter to be sluggish before moving on to a ‘normalized’ fourth quarter in FY 2024.
Tech Mahindra's MD and CEO, CP Gurnani blamed the weak back-to-back quarters on the poor demand situation which many of its peers too had mentioned in their September quarter results.
Tech Mahindra’s second quarter even saw some customers backing out of the projects due to plans to reduce their capital expenditure because their operating costs became very high, said Gurnani.
“The moment, as you know, many of the corporations borrow money and with the rising interest costs, I mean, we found some of our customers in a little more difficulty than I had anticipated,” said the CEO of Tech Mahindra.
However, on an optimistic note the IT company said that it witnessed a healthy pipeline at Rs 640 million for deals it could win.
“All I can tell you is for H2 FY24, the deal pipeline is very, very strong. I know there could be reasons for either quick closers or long closers but that's the nature of the business. I would have loved to finish strong,” said Chief Financial Officer Rohit Anand.
"..the timing of closures of the deals are still not back to where we saw last year,” he added.
The projections are the latest in a series of downbeat commentary from Indian tech majors such as Infosys and TCS, all of whom continue to struggle with poor demand for discretionary IT projects.
At the same time, some of them have reported decent demand for cost-cutting-oriented IT deals as companies in the US and Europe struggle to reduce operating expenses.