India’s Tech Mahindra posts 26% slide in Q4 profit as clients cut spending

Tech Mahindra (TEML.NS), an Indian company, on Thursday reported a 25.8% decline in fourth-quarter profit, affected by growing costs and difficult macroeconomic conditions that forced customers to cut spending.

The information technology services company’s consolidated net profit decreased to 11.18 billion rupees ($136.7 million) for the quarter ended March 31, falling short of analysts’ forecasts of 13.20 billion rupees.

New business wins for the Pune-based company for the quarter decreased by almost half to $592 million from $1.01 billion a year earlier.

The majority of income for Indian IT companies comes from the United States and Europe, which are experiencing a recession along with turmoil in the banking sector.

Tata Consultancy Services Ltd. (TCS.NS) and Infosys Ltd. (INFY.NS), the top two IT exporters from India, reported weaker-than-anticipated quarterly results. Both businesses cited a slowdown in the telecom and communication sector as a result of clients considering spending cuts and project rampdowns to save money.

A crucial business area for Tech Mahindra, the communication, media, and entertainment segment, currently represents 40.1% of total sales, down from 40.6% a year ago.

Compared to 121.16 billion rupees a year earlier, the total revenue from operations was 137.18 billion rupees. Costs for the business increased 18.2% to 124.94 billion rupees.

On Thursday, shares of Tech Mahindra increased by 0.69%. Compared to the 4.4% decline in the Nifty IT (.NIFTYIT), the stock was down 1.3% year to date.