1. At a Glance
India’s 5th largest IT services company, Tech Mahindra once rode the telecom IT wave like a boss. Today, it’s lagging behind in digital transformation and growth, while rivals zoom ahead in GenAI, cloud, and enterprise deals. But wait—dividend yield is 2.8% and they just bought Mahindra Racing UK. Pit stop or pivot?
2. Introduction with Hook
If TCS is the Ferrari of Indian IT and Infosys is a Tesla trying to reinvent itself, then Tech Mahindra feels like…a Mahindra Thar on a Formula 1 track. Rugged, legacy-rich, dependable—but not built for speed.
- TTM Sales: ₹53,334 Cr
- TTM Net Profit: ₹4,517 Cr
- Dividend Payout: 94%
- EPS Growth (3Y CAGR): -11%
While the market talks cloud-native apps and GenAI, TechM is still debugging its EBIT margins.
3. Business Model (WTF Do They Even Do?)
Tech Mahindra offers a wide bouquet of services across:
- Application Development & Maintenance
- Business Process Outsourcing (BPO)
- Consulting & Digital Transformation
- Infrastructure & Cloud Services
- Engineering/R&D services
Major verticals:
- Telecom (still their legacy backbone)
- BFSI, Healthcare, Manufacturing, Retail
Recent expansions:
- Sustainability tech
- EV/AutoTech via Mahindra Racing acquisition
- Partnerships in AI/ML with Microsoft & AWS
The challenge? Most peers moved from services to solutions. TechM is still transitioning… slowly.
4. Financials Overview
| Year | Revenue (₹ Cr) | Net Profit (₹ Cr) | EPS (₹) | OPM | ROCE |
|---|---|---|---|---|---|
| FY22 | 44,646 | 5,630 | 57.3 | 18% | 26% |
| FY23 | 53,290 | 4,857 | 49.6 | 15% | 22% |
| FY24 | 51,996 | 2,397 | 24.1 | 9% | 12% |
| FY25 (TTM) | 53,334 | 4,517 | 46.4 | 14% | 19% |
FY24 was a bloodbath. Margins crumbled. But FY25 looks like a cautious recovery—margin improving, profit back above ₹4,500 Cr.
5. Valuation
Current Price: ₹1,608
P/E: 35x
Book Value: ₹279
Dividend Yield: 2.8%
CMP / BV: 5.75x
📏 Fair Value Range Estimate:
- EPS base (₹43–₹46) with 20–25x multiple: ₹860 – ₹1,150
- EV/EBITDA normalized: ₹1,200 – ₹1,350
- DCF range: ₹1,150 – ₹1,300 (modest growth & terminal value)
Conclusion? Priced like a recovering growth story, not a tech rocket ship. Margin must stay in recovery mode to justify this.
6. What’s Cooking – News, Triggers, Drama
- Q1 FY26 PAT: ₹1,129 Cr (+60% YoY)
- Acquisition: Mahindra Racing UK
- GenAI Practice: Weak vs Infosys, TCS
- Margins now at 14%, up from 9% in FY24
- Multiple investor meetings ongoing
📍 Key Triggers:
- Margin stability above 15%
- Large deal wins (especially outside telecom)
- BFSI revival
- Racing brand synergy? Maybe just branding.
7. Balance Sheet
| Metric (₹ Cr) | FY25 |
|---|---|
| Equity Capital | ₹442 |
| Reserves | ₹26,919 |
| Borrowings | ₹2,025 |
| Total Liabilities | ₹44,267 |
| Cash Equivalents | ~₹6,000 |
| Investments | ₹3,182 |
No liquidity stress. Debt-light. Strong cash engine, though recent acquisitions may burn some gas.
8. Cash Flow – Sab Number Game Hai
| Year | CFO | CFI | CFF | Net Cash |
|---|---|---|---|---|
| FY25 | ₹5,786 Cr | ₹20 Cr | -₹5,834 Cr | -₹29 Cr |
| FY24 | ₹6,376 Cr | -₹1,318 Cr | -₹4,767 Cr | ₹291 Cr |
| FY23 | ₹5,572 Cr | -₹226 Cr | -₹5,078 Cr | ₹267 Cr |
Dividend outgo + buybacks = major financing drain. But stable operating inflow keeps the ship afloat.
9. Ratios – Sexy or Stressy?
| Metric | FY25 |
|---|---|
| ROCE | 18.6% |
| ROE | 14.6% |
| Dividend Payout | 94% |
| Debtor Days | 80 |
| Working Capital Days | 31 |
| OPM | 14% |
Margins improving. But dividend payout leaves little for reinvestment. They’re rewarding investors… instead of themselves.
10. P&L Breakdown – Show Me the Money
| FY | Sales | EBIT | Net Profit | EPS |
|---|---|---|---|---|
| FY23 | ₹53,290 Cr | ₹7,763 Cr | ₹4,857 Cr | ₹49.6 |
| FY24 | ₹51,996 Cr | ₹4,506 Cr | ₹2,397 Cr | ₹24.1 |
| FY25 (TTM) | ₹53,334 Cr | ₹6,964 Cr | ₹4,517 Cr | ₹46.4 |
FY24 = Disaster
FY25 = Recovery (but not yet resurrection)
11. Peer Comparison
| Company | P/E | OPM | ROCE | PAT (TTM) | M-Cap |
|---|---|---|---|---|---|
| TCS | 23.7 | 26.4% | 64.6% | ₹49,273 Cr | ₹11.7 L Cr |
| Infosys | 25.2 | 24.1% | 37.5% | ₹26,516 Cr | ₹6.6 L Cr |
| HCL Tech | 25.0 | 21.6% | 31.8% | ₹16,976 Cr | ₹4.2 L Cr |
| Wipro | 21.0 | 20.2% | 19.5% | ₹13,089 Cr | ₹2.7 L Cr |
| TechM | 35.0 | 13.7% | 18.6% | ₹4,517 Cr | ₹1.6 L Cr |
Ouch. Trading at highest P/E in the pack with lowest margin? That’s either optimism… or denial.
12. Miscellaneous – Shareholding, Promoters
| Shareholder | % (Mar 2025) |
|---|---|
| Promoters | 35.00% |
| FIIs | 22.95% |
| DIIs | 32.13% |
| Public | 9.74% |
Trends:
- FII stake slowly dropping (peak was 30% in 2022)
- DII holding has risen consistently (faith restored?)
- Public float stable, but muted retail enthusiasm
13. EduInvesting Verdict™
Tech Mahindra is no longer the telecom-first IT juggernaut it once was. It’s pivoting—but not fast enough. While peers lock horns over AI, TechM is still rebooting its legacy infra. That said, FY25 shows signs of life—profit recovery, margin stabilizing, new leadership initiatives.
But here’s the twist: It’s not cheap. You’re paying a premium for a company that’s still playing catch-up.
It’s like betting on a 40-year-old racehorse to win the Kentucky Derby—can it still run? Yes. Will it win? Only if the favorites fumble.
Metadata
– Written by EduInvesting Research | 16 July 2025
– Tags: Tech Mahindra, IT Services, Telecom IT, Dividend Stocks, Margin Recovery, Mahindra Group
