19 March 2020
Update | Sector: Technology
TP: INR820 (+42%)
So far, no material disruption!
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
559.5 / 7.7
846 / 550
We hosted a call with TechM’s management to understand the initiatives being
undertaken to minimize COVID-19 disruption. Key takeaways:
So far, business continuity is not materially disrupted
Financials Snapshot (INR b)
2020E 2021E 2022E
373.8 416.3 453.7
EBIT Margin (%)
12.3 12.3 13.3
43.7 47.7 55.6
49.6 54.2 63.2
EPS Gr. (%)
239.4 264.6 298.8
21.2 21.7 22.6
17.6 17.6 18.7
44.3 46.1 39.6
Div Yield (%)
Shareholding pattern (%)
Dec-19 Sep-19 Dec-18
FII Includes depository receipts
Stock Performance (1-year)
Sensex - Rebased
So far, management does not see any material impact on delivery/operations.
However, given volatility of the situation, it is being closely monitored.
Clients are adapting to the current situation and waiving off standard terms of
contracts to allow employees to work from home so that business continuity is
not materially disrupted.
Almost all onsite resources are equipped with laptops to be able to work from
home. Among the offshore resources, 40-50% are equipped with laptops to
ensure business continuity, just in case if employees were to work from home.
BPO is one segment where facilitating work from home option is not very easy.
In BPO segment, company is spreading employees across floors and shifts to
avoid large gatherings.
Offices in China remains closed so far. They may re-start in a few days as the
situation in China is gradually improving. In Italy, people are working from
home and client projects have been running on track.
So far not witnessing any material slowdown in demand
It will take more time to assess if this is a long-term impact or a transient one.
Demand was impacted in China and Italy. Other than these two geographies,
there is no broad-based impact across any other customers as of now.
Traction in deal closures was good till the end of February. Customers were
willing to select and evaluate vendors through digital meetings. There has not
been a wide disruption yet.
Over the last couple of weeks, the company is noticing caution in discretionary
spend within 2-3 telecom accounts. Expect some of the network roll out
spends to witness slight delays. So far, it is not a broad-based trend.
Premature to conclude which all verticals will be impacted. Prima facie
understanding is that manufacturing clients will see some impact.
Retail, ENU and Transport verticals should see a meaningful impact. However,
TechM’s presence in these verticals is limited.
Despite the sharp interest rate cuts across economies and volatility in capital
markets, BFSI should deliver a good performance as the customer base of
TechM well is diversified across geographies and a large deal has been ramping
up in this vertical. Expect growth in BFSI in the near term.
Telecom as a vertical is very resilient. However, discretionary spends are higher
in upcycles. Spends in this vertical need to be watched out.
Research analyst – Sudheer Guntupalli –
(Sudheer.Guntupalli@MotilalOswal.com); +91225036 2749
Research analyst: Mohit Sharma
(Mohit.Sharma@MotilalOswal.com); +9122 6129 1531 /
(Heenal.Gada@MotilalOswal.com); +9122 2368 1805
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.