Maintain 'hold' on Tech Mahindra - Geojit BNP Paribas Financial Services

- The company reported satisfactory results for 3QFY13.

- Revenue grew 10.1% qoq in USD terms (3Q included full contribution from HGS and 19 days from the Comviva acquisition.

- EBITDA margin positively surprised on lower employee cost, higher utilization and operational gains.

- EPS (ex Satyam) beat the market expectations.

- BT revenue (29% of total) declined 3.3% qoq. Management has indicated that the decline could continue in the near term, as BT rationalizes its cost.

- Non-BT clients grew 2% qoq and were impacted by holidays.

- The company signed deals worth USD100 million in 3Q and was optimistic on its pipeline, win rates and on new deals ramping up in the next two quarters.

- Despite the beat, it seems that the indicators from 3Q are mixed.

- The positives are improved deal traction, falling BT dependence and another margin beat.

- The negatives are - software headcount is almost unchanged for nearly two years now. In fact, BPO employees now make up 46% of headcount but contributing 20% of revenue, indicating that the company's business is fundamentally changing towards more commoditised services.

- Attrition increased 2 percent point to 18% while receivables are up by 11 days since 1Q.

Source : Equity Bulls

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