1 November 2017
2QFY18 Results Update | Sector: Technology
Tech Mahindra
Buy
BSE SENSEX
33,600
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
10,441
TECHM IN
Profitability resurrection on track
976
Enterprise led growth:
TECHM’s 2QFY18 revenue of USD1,179m grew 3.6%
477.2 / 7.4
QoQ. In CC terms, growth at 2.3% QoQ was a tad ahead of our estimate of
515 / 358
+1.7% and implied cross-currency tailwinds of 130bp. The driver this quarter
0/5/-8
was Enterprise, which saw strong growth of 6.3% QoQ. Even excluding the
1290
integration of HCI, the segment grew 3.9% QoQ. While Telecom was flat in 2Q,
63.9
CMP: INR489
TP: INR560(+15%)
Financials & Valuations (INR b)
2017 2018E
Y/E Mar
291.4
309.1
Net Sales
41.8
43.6
EBITDA
27.5
31.8
PAT
30.9
35.8
EPS (INR)
-11.9
15.9
Gr. (%)
187.9
196.9
BV/Sh (INR)
18.4
18.9
RoE (%)
15.2
15.6
RoCE (%)
15.8
13.7
P/E (x)
2.6
2.5
P/BV (x)
2019E
346.9
50.6
33.5
37.7
5.3
223.3
18.2
15.2
13.0
2.2
Estimate change
TP change
Rating change
it is expected to pick-up in 2HFY18 on account of seasonal support and
stability in LCC.
Steep margin improvement despite wage hikes:
This was the second quarter
that TECHM saw a 4% reduction in Software Professionals headcount (3,409
employees), cost benefits from which aided the 80bp EBITDA margin beat to
14.5%, also supported by the absence of visa expenses and an increase in
utilization (+400bp QoQ). PAT at INR8.4b grew 4.7% QoQ, against our
expectation of -2.7%, primarily led by the beat on profitability and higher
other income aided by favorable hedge positions.
Multiple levers yet in hand:
The margin trajectory has been looking upward
for TECHM since the past two quarters – a cumulative improvement of 250bp
from 12% in 4QFY17. With a seasonally strong 2H coming up, the path is not
likely to alter in the near term. Even beyond that period, although utilization
has little juice to squeeze out from current levels, visibility of profitability
recovery stems out of automation, offshoring, yield management, and
improved margins in subsidiaries.
Valuation view:
Our earnings estimates for FY18/19 are up 5.5/2.5%, led by
the 2Q beat, but mildly negated by lower other income (a result of outflow of
USD140m for the IP partnership struck this quarter, details of which remain
opaque for now). TECHM trades at 13.7/13.0x FY18/19E earnings. The
remainder tailwinds and consequent improvement of profitability are likely to
feed positively into the valuation multiple, resulting in us valuing forward
earnings at 14x (v/s 13x earlier) to derive a price target of INR560, upside of
15%. Maintain
Buy.
(
FY18E
2Q
3Q
4Q
1,179
1,201
1,228
3.6
1.9
2.2
76,064 78,675 81,039
6.1
4.1
8.1
29.3
30.9
31.2
14.7
16.5
13.8
11,057 11,352 11,883
14.5
14.4
14.7
11.0
11.4
11.6
3,222
1,343
1,260
386
326
311
25.3
23.5
23.5
8,362
7,572
7,920
4.7
-9.4
4.6
29.7
-11.5
34.7
9.4
8.5
8.9
117,225 122,008 124,525
81.0
78.6
79.5
16.0
35.9
33.4
33.9
FY17
4,351
7.8
291,408
10.0
29.4
15.1
41,843
14.4
11.0
6,836
1,286
26.0
27,447
-12.0
31.9
117,693
77.5
36.2
Est.
2Q
1,175
3.3
75,582
5.5
28.4
14.7
10,356
13.7
10.4
2,706
311
23.5
7,772
-2.7
20.5
8.7
121,105
78.7
36.4
bp)
0.3
33bp
0.6
67bp
88bp
5bp
6.8
84bp
63bp
19.0
24.2
7.6
Quarterly Performance (Consolidated)
Y/E March
Revenue (USD m)
QoQ (%)
Revenue (INR m)
YoY (%)
GPM (%)
SGA (%)
EBITDA
EBITDA Margin (%)
EBIT Ma rgi n (%)
Othe r i ncome
Inte re s t e xpe ns e
ETR (%)
PAT excl. BT amort & EOI
QoQ (%)
YoY (%)
EPS (INR)
Headcount
Uti l e xcl . tra i ne e s (%)
Attri ti on (%)
Offs hore re v. (%)
FY17
1Q
2Q
3Q
4Q
1Q
1,032
1,072
1,116
1,131
1,138
0.9
4.0
4.1
1.4
0.6
69,209 71,674 75,575 74,950 73,361
10.0
8.3
12.8
8.9
6.0
29.5
30.6
30.7
26.9
28.0
14.6
15.7
15.0
14.9
15.3
10,290 10,701 11,865
8,987
9,347
14.9
14.9
15.7
12.0
12.7
12.0
11.5
12.4
8.2
9.4
1,519
1,387
1,552
2,378
4,106
274
345
349
318
370
25.9
30.8
20.2
28.2
25.4
6,561
6,447
8,560
5,879
7,985
-23.5
-1.7
32.8
-31.3
35.8
5.4
-17.9
12.8
-31.5
21.7
7.4
7.3
9.6
6.6
9.0
107,216 111,743 117,095 117,693 115,990
78.0
78.0
77.0
77.0
77.0
21.0
19.0
18.0
17.0
17.0
36.6
36.5
36.1
35.7
36.3
-3.2
226bp
-48bp
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.
Ashish Chopra – Research Analyst
(Ashish.Chopra@MotilalOswal.com); +91 22 6129 1530
Sagar Lele – Research Analyst
(Sagar.Lele@MotilalOswal.com); +91 22 6129 1531

Tech Mahindra
2QFY18: CC growth a tad above our expectations
TECHM’s 2QFY18 revenue at USD1,179m grew by 3.6% QoQ. In CC terms growth
at 2.3% QoQ was a tad ahead of our estimate of 1.7%, and implied cross-
currency tailwinds of 130bp.
In rupee terms, revenue was INR76.1b, 3.7% QoQ, versus our estimate of
INR75.6b (3.0% QoQ).
Exhibit 1: Growth pick-up led by strength in Enterprise
USD revenue - LHS (m)
5.2
3.7
2.7
0.5
6.5
4.0
2.2
0.4
0.8
0.9
4.1
1.4
3.6
0.6
QoQ Growth - RHS (%)
Source: MOSL, Company
Profit revival plan bearing fruit
Gross profit margin expanded by 130bp QoQ to 29.3%, 70bp ahead of our
estimate of 28.4% (+40bp QoQ).
EBITDA margin was at 14.5%, +180bp QoQ, against our expectation of 13.7%
(+100bp QoQ).
Steep margin expansion was led by improvement of operational efficiencies. The
output of this exercise is evident from the headcount reduction (-3,409) and
increased utilization (81% in 2Q versus 77% in the previous quarter).
Exhibit 2: Profitability higher because of lower headcount and higher utilization
EBITDA margin (%)
18.3
20.2
20.3
15.3
14.7
14.1
14.4
15.3
15.0
14.4
16.6
15.4
16.9
16.9
14.9
14.3
13.7
14.6
14.9
15.7
15.7
15.0
12.0
14.9 15.3
14.5
12.7
14.7
SGA (% of sales)
Source: MOSL, Company
1 November 2017
2

Tech Mahindra
Exhibit 3: Utilization steady over the last few quarters
Utilization (incl Trainees)
79.0
74.0
73.0
74.0
75.0
77.0
74.0
71.0
77.0
77.0
Utilization (excl trainees)
82.0
80.0
80.0
80.0
78.0
75.0
76.0
83.0
81.0
81.0
81.0
81.0
78.0
78.0
77.0
77.0
77.0
72.0
Source: Company, MOSL
Other Income was at INR3.2b against expectations of INR2.7b. Other Income
during the quarter consisted of INR2.3b from foreign exchange gains and
INR953m from interest, dividends and others.
PAT grew by 4.7% QoQ to INR8.36b, compared to our expectation of -2.7% QoQ
to INR7.77b. The PAT beat was largely led by both operational beat and higher
other income.
Enterprise outperformance continues
In 2QFY18, Telecom revenue was flat QoQ.
Enterprise segment grew by 6.3% QoQ. Excluding the integration of HCI,
revenue growth in the Enterprise segment was 3.9% QoQ.
Exhibit 4: Enterprise on an upward trajectory
22
28
Telecom (USD M)
22
6
-2
-7
-10
-5
-3
-4
15
2
1
2
-1
10
16
12
8
8
8
6
12 12
Telecom YoY (%)
Non-Telecom (USD m)
YoY (%)
21
20 20
19
422 432 454 437 457 465 483 491 512 541 576 596 613 651
Source: MOSL, Company
Growth in Enterprise was strong in the verticals of Manufacturing (2.0% QoQ),
Tech, Media and Entertainment (1.9% QoQ), Retail, Transport and Logistics
(9.7% QoQ).
1 November 2017
3

Tech Mahindra
Exhibit 5: Communications flat and Enterprise grew by 6.3% QoQ
Verticals
Communication
Manufacturing
Tech | Media | Entertainment
BFSI
Retail | Transport | Logistics
Others
Total
Contr to
Rev. (%)
43.7
19.0
5.9
14.1
7.2
9.9
100.0
Growth -
QoQ (%)
0.2
2.0
1.9
1.5
9.7
23.6
3.4
Contr to
incr. rev (%)
2
11
3
6
19
58
100.0
4Qtr
CQGR (%)
-0.2
2.1
-2.6
7.8
3.9
12.5
2.4
Source: Company, MOSL
In terms of geography, revenue from the Americas grew by 0.3% QoQ (despite
the acquisition of HCI), Europe grew by 4.3% QoQ and RoW grew by 9.4% QoQ.
Exhibit 6: Revenue growth driven by Europe and RoW
Geographies
Americas
Europe
ROW
Total
Contr to
Rev. (%)
45.3
30.0
24.7
100.0
Growth -
QoQ (%)
0.3
4.3
9.4
3.4
Contr to
Incr. rev (%)
4
36
61
100.0
4Qtr
CQGR (%)
0.8
2.7
5.4
2.4
Source: Company, MOSL
Growth in top clients remained lackluster with the top 5/10/20 exhibiting
growth of -0.8/0.2/-1.3% QoQ.
Exhibit 7: Top clients saw some weakness during the quarter
Client concentration (QoQ)
Top 5 clients
Top 6-10 clients
Top 11-20 clients
Contr to
Rev. (%)
24.8
10.3
11.1
Growth - QoQ Contr to Incr.
(%)
rev (%)
-0.8
2.6
-5.7
-6
8
-19
4Qtr
CQGR (%)
-1.1
-0.2
0.8
Source: Company, MOSL
Takeaways from management commentary
Pick-up expected in 2H:
2H is strong for TECHM because of seasonality in the
Communication business. This is expected to drive better performance going
forward after posting flat revenue in 2Q. The Network business is now stable on
the revenue front and shouldn’t lead to any headwinds to hamper this
trajectory.
Employee reduction as planned:
This was the second quarter of employee
reduction for TECHM. As mentioned earlier, freshers hired earlier got seeped
into projects, and pyramid rationalization aided the absolute headcount
reduction. This was also reflected in the sudden uptick in utilization during the
quarter.
Struck an IP partnership…:
TECH got into an IP arrangement during the quarter
in the area of virtualization and cloud management software. This would enable
the company to tap new markets and growth levers for next-gen infrastructure
workloads. Of the total consideration of USD140m, it has made a cash payment
of USD35m in 2Q, and the remainder would be paid in 12 equal quarterly
4
1 November 2017

Tech Mahindra
installments starting 3QFY18. This would then be amortized over a period of 10
years.
…Few details disclosed at the moment:
Revenue and profits from the deal
would start getting consolidated 3QFY18 onwards. However, the company
refrained from talking about the partner and other details around the deal. The
approach around the deal can’t be taken as a set strategy, and the company will
individually assess deals as they come.
Several margin levers in hand:
Margins during the quarter were higher led by
operational efficiency improvement. TECHM expects continued margin recovery
going forward led by, [1] Improvement in LCC margins, [2] Improved utilization,
[3] Pyramid rationalization because of the integration of freshers in the system
and [4] Increased thrust on Automation.
Change in estimates
Since 2Q revenue was just a tad better than our expectations, we haven’t made
any major adjustments to our growth estimates.
However, accounting for the beat on margins in 2Q, and the visibility of
improvement going forward, we have inched up our estimates. We now expect
gradual improvement in EBITDA margins from 14.1% in FY18E to 14.8% in FY20E.
This has resulted in an EPS upgrade of 5.5/2.5/4.4% for FY18/19/20E.
Exhibit 8: Change in estimates
FY17
INR/USD
USD Revenue - m
USD rev Gr.(%)
EBIDTA Margin (%)
EPS - INR
65.1
4,746
9.1
14.1
35.8
Revised
FY18E FY19E
66.8
5,196
9.5
14.6
37.7
67.0
5,708
9.8
14.8
43.1
FY17
65.3
4,715
8.4
13.7
34.0
Earlier
FY18E
66.8
5,153
9.3
14.5
36.8
FY19E
67.0
5,802
12.6
14.2
41.3
FY17
-0.2%
0.7%
73bp
40bp
5.5%
Change
FY18E
FY19E
0.0%
0.8%
17bp
8bp
2.5%
0.0%
-1.6%
-274bp
59bp
4.4%
Source: Company, MOSL
Valuation view
Restructuring of LCC and sluggish offtake in the large deals signings in
Communications have dragged TECHM’s revenue growth performance, and
more so the margins.
While Telecom recovery may be gradual, there are some structural
strengths in TECHM’s business to drive much improved growth over the
medium-to-long term:
1. Success in large deal wins and above-industry growth in the Enterprise
segment is an encouraging indicator of improving competitive prowess.
2. Network management services have potentially expanded the
addressable market for TECHM, with directly addressable spend
standing at ~USD40b. That may not start playing out until TECHM brings
the LCC house in order (revenue has been pruned down to ~USD300-
310m annualized in run rate USD430m during acquisition 1 year ago).
3. TECHM also has a sizeable scale in Engineering services, and the
opportunity in the same can be leveraged, especially after the
acquisition of Mahindra Engineering Services (MES)
1 November 2017
5

Tech Mahindra
Profitability has taken a hit for TECHM over the last three years, with a
cumulative decline in EBITDA margin of 780bp over FY14-17. This has shown
improvement intermittently as the company squeezed some of its
operational levers and underwent cost optimization. However, sustained
improvement in margins has been elusive, with persistent issues in LCC (and
occasional ones in the core business too).
We expect TECHM to grow its USD revenue at a CAGR of 9.7% over FY18-20
and EPS at a CAGR of 9.8% during this period. While profitability
improvement has been on-track for the last two quarters, the remainder
tailwinds on, and consequent improvement of profitability are likely to feed
positively into the valuation multiple. Our price target of INR560 discounts
forward earnings by 14x, implying an upside of 15%. Maintain Buy.
Key Triggers
Large deal announcements in enterprise segment
Recovery in Telecom growth
Sustained margin improvement on account of measures taken
Key Risks
Adverse visa related regulations as TECHM’s proportion of local resources at
onsite is lower than peers
Currency fluctuations given higher sensitivity to earnings v/s peers
More adversity in integration of acquisitions
Exhibit 10: TECHM 1-year forward PB chart
Max (x)
-1SD
12.0
8.0
P/B (x)
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
Exhibit 9: TECHM 1-year forward PE chart
36.0
P/E (x)
Min (x)
Avg (x)
+1SD
9.7
18.0
12.5
16.7
3.8
21.6
8.2
12.5
4.0
0.0
4.3
2.9
1.6
1.2
2.0
0.0
Source: Company, MOSL
Source: Company, MOSL
1 November 2017
6

Tech Mahindra
Story in charts
Exhibit 11: Telecom prowess reflected in vertical mix
Retail,
Travel,
Logistics,
7.2
BFSI, 14.1
Tech,
Media,
Ent, 5.9
Others,
9.9
Exhibit 12: Scale and diversity lent by Satyam acquisition
Revenue (USD m)
127.7
YoY Growth (%)
Telecom,
43.7
5.4 (0.9) 8.9 8.8
17.7 18.2 10.2 7.8 9.1 9.5 9.8
985 977 1063 1156 2633 3098 3664 4037 4351 4746 5196 5708
Manufactu
ring, 19.0
Source: Company, MOSL
Source: Company, MOSL
Exhibit 13: Telecom recovery seeing gradual progress
28
Telecom (USD M)
22
6
-2
-7
-10
-5
-3
-4
2
1
2
-1
Telecom YoY (%)
Exhibit 14: BFSI showing increased momentum
BFSI
Growth (QoQ %)
10.4
5.7
-0.9
3.8
-1.1
-1.9
2.5
9.0
18.6
9.1
5.8
2.8
1.5
22
7.5
434 468 470 446 423 437 423 423 410 421 430 426 416 417
Source: Company, MOSL
Source: Company, MOSL
Exhibit 15: Margin recovery on track
EBITDA (INRm)
20.2 20.3
18.3
15.3
14.4
16.6 16.9 16.7
14.9 14.9
15.7
12.0
12.7
EBITDA margin (%)
Exhibit 16: Lever of utilization well utilized so far!
Utilization (incl Trainees)
Utilization (excl trainees)
83.0
82.0
81.0 81.0 81.0
80.0 80.0 80.0
81.0
78.0 78.0
77.0 77.0 77.0
78.0
14.5
75.0
76.0
74.0
73.0 74.0
75.0
79.0
77.0 77.0 77.0
72.0
74.0
71.0
Source: Company, MOSL
Source: Company, MOSL
1 November 2017
7

Tech Mahindra
Exhibit 17: Operating metrics
Operating metrics
Revenue by geography (%)
Americas
Europe
Rest of World
Vertical Split (%)
Telecom
Manufacturing
Tech | Media | Entertainment
BFSI
Retail | Transport | Logistics
Others
Onsite-offshore mix (%)
Onsite
Offshore
Client metrics
No. of active clients
% of repeat business
No. of Million $ clients
USD1m+
USD5m+
USD10m+
USD20m+
USD50m+
Client concentration (%)
Top client
Top 5 Clients
Top 6-10
Top 11-20
Headcount (end of period)
Software professionals
BPO
Sales and Support
Total
IT Attrition (LTM) (%)
IT Utilization (%)
IT Utilization (excluding trainees) (%)
Receivable Days (DSO)-Including Unbilled
Borrowings (USD m)
Cash and Cash Equivalent (USD m)
Capital Expenditure (USD m)
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18
47.7
29.4
22.9
48.9
29.3
21.9
47.8
28.9
23.2
46.8
28.5
24.7
49.0
28.28
22.78
48.3
29.7
22
46.7
29.4
23.9
45.1
29.6
25.3
46.8
29.8
23.4
45.3
30
24.7
52.7
17.1
7.3
10
6. 5
6.5
52.9
16.7
8.2
9.6
6.0
6.6
51.3
17.1
7.4
9.8
6.8
7.6
50.9
17.1
7.5
10.6
6.2
7.7
49.24
18.14
7.5
11.3
6.5
7.3
48.4
19.2
7.2
11.5
6.8
6.8
47.3
18.4
6.4
13.1
7.6
7.1
46.3
19.2
6.2
14.1
6.5
7.7
45.2
19.3
6.0
14.4
6.8
8.3
43.7
19
5.9
14.1
7.2
9.9
61.0
39.0
61.7
38.3
62.7
37.3
63.2
36.8
63.4
36.6
63.5
36.5
63.9
36.1
64.3
35.7
63.7
36.3
64.1
35.9
770
99
788
97
801
96
807
96.3
818
96.3
825
95.6
837
93.4
843
93.5
864
97.2
885
95
296
101
60
36
13
298
102
62
36
14
326
105
63
37
14
319
112
63
40
14
317
120
64
42
14
341
120
66
40
14
356
128
65
38
14
354
134
71
36
14
377
139
74
41
14
390
147
81
40
14
33
11
13
32
11
13
28
12
12
28
11
13
28.8
11.2
12.6
28.5
11.4
11.8
27.8
10.6
12.1
26.6
11
11.4
25.9
10.4
12.2
24.8
10.3
11.1
71,997 71,657 71,892 72,125 73,590 78,404 80,858 82,403 78,996 75,587
24,394 26,513 28,279 27,254 27,326 27,669 29,372 28,414 30,332 35,287
7,282
7,065
6,966
6,053
6,300
5,670
6,865
6,876
6,662
6,351
103,673 105,235 107,137 105,432 107,216 111,743 117,095 117,693 115,990 117,225
19
74
75
113
125.7
526.3
41.4
20
77
79
108
130.2
532.5
40.0
20
77
80
104
134.3
746.8
19.3
21
77
80
106
164.8
783.3
63.8
21
78
80
106
200
851.2
23.5
19
78
82
107
206.3
600.7
50.4
18
77
83
102
211
728.9
28.1
17
77
81
95
210.7
830.2
42.8
17
77
81
104
320.7
931.8
22.5
16
81
81
106
210.7
913.2
70.6
Source: Company, MOSL
1 November 2017
8

Tech Mahindra
Exhibit 18: Operating metrics
Operating metrics
Rupee USD Rate
Period closing rate
Period average Rate
Proportion of Revenues From Major Currencies
USD
GBP
EURO
AUD
Others
Consolidated Hedge Position
GBP In Mn
Strike rate (INR)
USD In Mn
Strike rate (INR)
Verticals (QoQ)
Telecom
Manufacturing
Tech | Media | Entertainment
BFSI
Retail | Transport | Logistics
Others
Total
Revenue by geography (QoQ)
Americas
Europe
Rest of World
Total
Client concentration (QoQ)
Top 5
Top 6-10
Top 11-20
Net additions
Software professionals
BPO
Sales and Support
Total
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18
63.64
63.63
51.1
13.2
11.7
5
18.9
65.58
65.40
52.4
12.7
11.8
4.5
18.5
66.15
66.03
51.3
11.4
11.3
4.7
21.3
66.26
67.49
49.3
10.8
11.3
4.5
24.1
67.52
67.04
50.0
10.4
11.2
4.7
23.7
66.61
66.86
48.9
11
12.7
4.6
22.7
67.92
67.7
48.6
12
11.5
4.4
23.5
64.85
66.47
45.9
12.3
11.4
4.6
25.8
64.57
64.44
48.6
12.1
11.0
4.8
23.4
247
97.0
878
72.6
-1.8
1.1
-2.6
2.8
5.3
8.4
0.6
4.4
1.3
-6.9
0.6
-2.0
-4.9
7.7
-3,407
1,918
-214
-1,703
65.28
64.45
46.9
12
11.2
4.9
24.9
260
95.4
646
72.2
0.2
2.0
1.9
1.5
9.7
23.6
3.4
0.3
4.3
9.4
3.6
-0.8
2.6
-5.7
-3,409
4,955
-311
1,235
166.8 173.3
185
177.9 185.5 192.6 226.7
201
105.8 106.9
103
108.4 107.1 104.8 100.2
99.8
1459.3 1504.5 1341.7 1297.2 1246.6 1087.9 1123.2 1030.2
68.5
69.5
66.6
71.1
71.5
72.4
72.5
72.9
-4.2
4.2
4.8
10.4
4.6
9.9
0.5
5.6
-0.8
-7.2
0.5
0.5
-7.9
8.9
-1,002
1,701
-307
392
2.6
-0.2
14.8
-1.9
-4.9
4.6
2.2
4.8
1.9
-2.2
2.3
-0.9
2.2
2.2
-401
2,119
-156
1,562
-2.7
2.8
-9.4
2.5
13.7
15.6
0.4
-1.9
-1.0
6.3
0.2
-12.2
9.5
-7.4
183
1,766
-47
1,902
0.0
0.8
2.1
9.0
-8.1
2.1
0.8
-1.3
-0.6
7.3
0.9
0.4
-6.8
8.3
-703
-1,025
23
-1,705
-2.4
7.0
0.9
7.5
5.8
-4.4
0.9
5.6
0.1
-7.0
0.9
4.1
1.8
-1.5
1,465
72
247
1,784
2.2
10.0
-0.2
5.8
8.8
-3.2
3.9
2.5
9.2
0.4
3.9
2.9
5.8
-2.6
4,814
343
-630
4,527
1.7
-0.3
-7.5
18.6
16.3
8.7
4.1
0.6
3.0
13.1
4.1
1.5
-3.2
6.7
2,454
1,703
1,195
5,352
-0.8
5.8
-1.8
9.1
-13.3
9.9
1.5
-2.1
2.0
7.3
1.4
-3.0
5.2
-4.5
1,545
-958
11
598
Source: Company, MOSL
1 November 2017
9

Tech Mahindra
Financials and Valuations
Key assumption
Y/E Mar
INR/USD Rate
Revenues (USD m)
Total Headcount
Net Addition
Per Capita Productivity (USD)
Utilization incl. Trainees (%)
IT Services (%)
2013
54.4
2,633
83,109
8,993
31,678
73.1
90.5
2014
60.8
3,098
89,441
6,332
34,638
73.1
90.3
2015
61.4
3,664
103,281
13,840
35,471
69.9
91.7
2016
65.6
4,037
105,432
2,151
38,294
74.0
92.6
2017
67.0
4,351
117,693
12,261
36,971
73.4
93.1
2018E
65.1
4,746
124,525
6,832
38,115
78.0
93.3
2018E
309,139
6.1
43,639
14.1
10,021
33,619
1,394
9,932
0
42,157
10,316
24.5
1
31,840
31,840
15.9
2018E
4,400
168,576
172,976
23,787
-5,047
210,545
70,410
0
70,410
3,760
28,696
166,478
0
65,682
22,640
78,157
58,798
27,510
31,289
107,680
210,545
2019E
66.8
5,196
135,609
11,084
38,318
80.0
93.3
2019E
346,883
12.2
50,595
14.6
10,343
40,252
1,183
4,745
0
43,814
10,296
23.5
-9
33,527
33,527
5.3
2019E
4,400
191,752
196,152
23,695
-5,047
233,630
74,068
0
74,068
3,760
32,196
196,555
0
73,233
41,482
81,840
72,949
31,151
41,797
123,606
233,630
2020E
67.0
5,708
147,218
11,609
38,773
79.9
93.4
2020E
382,440
10.3
56,737
14.8
10,841
45,895
987
5,238
0
50,146
11,784
23.5
2
38,360
38,360
14.4
2020E
4,400
217,691
222,091
23,603
-5,047
259,477
77,226
0
77,226
3,760
35,696
228,565
0
79,750
63,796
85,019
85,770
34,006
51,764
142,795
259,477
Income Statement
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adjusted PAT
Change (%)
2013
143,320
161.1
30,631
21.4
3,896
26,735
922
2,121
-2,940
24,994
6,479
25.9
301
18,214
19,554
79.1
2013
2,316
66,214
68,530
14,702
-3,477
93,408
22,318
0
22,318
2,595
14,174
95,541
0
33,688
34,629
27,224
41,220
8,577
32,643
54,321
93,408
2014
188,313
31.4
41,836
22.2
5,221
36,615
673
1,129
-1,117
35,954
9,790
27.2
336
25,828
26,945
37.8
2014
2,335
89,469
91,804
8,420
-3,830
110,151
28,606
0
28,606
0
14,718
112,241
0
43,486
33,202
35,554
45,415
14,722
30,693
66,827
110,151
2015
224,779
19.4
41,536
18.5
6,079
35,457
689
1,006
0
35,774
9,472
26.5
310
25,992
25,992
-3.5
2015
4,804
117,682
122,486
11,287
-3,901
143,780
40,329
0
40,329
5,677
21,028
127,545
0
52,059
24,049
51,438
50,800
20,587
30,213
76,745
143,779
2016
264,941
17.9
43,426
16.4
7,620
35,806
961
5,322
0
40,167
8,600
21.4
412
31,155
31,155
19.9
2016
4,839
138,824
143,663
15,564
-5,575
167,990
43,446
0
43,446
6,294
24,934
154,821
0
57,705
40,138
56,978
61,505
22,755
38,750
93,316
167,990
2017
291,408
10.0
41,843
14.4
9,781
32,062
1,286
6,836
0
37,612
9,785
26.0
357
27,470
27,470
-11.8
2017
4,388
159,984
164,372
23,761
-2,674
202,404
63,590
0
63,590
3,729
24,966
165,706
0
53,377
32,186
80,143
55,587
23,117
32,470
110,119
202,404
(INR Million)
Balance Sheet
Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
(INR Million)
1 November 2017
10

Tech Mahindra
Financials and Valuations
Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
RoIC
Turnover Ratios (%)
Fixed Asset Turnover (x)
Debtors (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
2013
22.0
28.2
81.4
5.0
23.1
22.6
17.4
5.8
2.6
12.0
1.0
32.6
28.7
65.1
5.8
60
2014
30.7
36.9
112.3
5.0
16.3
15.9
13.3
4.4
1.9
8.7
1.0
36.4
26.3
46.5
7.0
75
2015
29.3
36.1
142.2
6.0
20.5
16.7
13.5
3.4
1.8
9.5
1.2
24.5
20.5
30.0
6.0
78
2016
35.1
43.7
165.6
12.0
34.2
13.9
11.2
3.0
1.5
8.9
2.5
23.4
20.1
25.7
5.5
76
2017
30.9
41.9
187.9
9.0
29.1
15.8
11.7
2.6
1.4
9.9
1.8
18.4
15.2
17.0
5.0
70
2018E
35.8
47.1
196.9
12.0
33.5
13.7
10.4
2.5
1.4
9.8
2.5
18.9
15.6
14.5
4.4
70
2019E
37.7
49.3
223.3
10.0
26.5
13.0
9.9
2.2
1.2
8.0
2.0
18.2
15.2
16.6
4.6
73
2020E
43.1
55.3
252.8
12.0
27.8
11.3
8.8
1.9
1.0
6.7
2.5
18.3
15.5
18.9
4.8
73
-0.3
2013
30,631
-16,372
-7,608
0
37,353
44,004
-3,099
40,905
-1,940
0
-5,039
1,032
-7,036
0
-750
-6,754
32,211
2,418
34,629
-0.3
2014
41,836
-7,901
-12,302
0
0
21,634
-7,854
13,780
-8,539
0
-16,393
19
-1,305
0
-5,381
-6,668
-1,427
34,629
33,202
-0.1
2015
41,536
-9,496
-8,874
0
0
23,167
-21,365
1,802
-9,050
0
-30,415
2,469
2,396
0
-6,771
-1,905
-9,154
33,202
24,048
-0.2
2016
43,426
-8,987
5,456
0
0
39,895
-17,357
22,538
10,611
0
-6,746
35
-3,469
0
-13,626
-17,060
16,089
24,048
40,138
0.0
2017
41,843
-9,226
-17,243
0
0
15,374
-9,694
5,680
5,293
0
-4,401
-451
-9,196
0
-9,278
-18,925
-7,952
40,138
32,185
0.0
2018E
43,639
-10,317
-5,155
0
0
28,168
-11,995
16,173
-2,738
0
-14,733
12
-1,167
0
-12,421
-13,576
-142
32,185
32,044
-0.1
2019E
50,595
-10,288
2,916
0
0
43,223
-12,000
31,223
1,061
0
-10,939
0
-1,091
0
-10,351
-11,442
20,843
32,044
52,886
-0.2
2020E
56,737
-11,786
3,125
0
0
48,075
-12,000
36,075
1,554
0
-10,446
0
-895
0
-12,421
-13,316
24,313
52,886
77,200
Cash Flow Statement
Y/E Mar
Adjusted EBITDA
Non cash opr. exp (inc)
(Inc)/Dec in Wkg. Cap.
Tax Paid
Other operating activities
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free cash flows
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax) & Others
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
(INR Million)
1 November 2017
11

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Tech Mahindra
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appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
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the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the
views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time
without any prior approval. MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities
mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities
functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already
available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the views expressed therein. This document is
being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not
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certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or
representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The
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information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring
Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id:
na@motilaloswal.com,
Contact No.:022-30801085.
Registration details of group entities.: MOSL: NSE (Cash): INB231041238; NSE (F&O): INF231041238; NSE (CD): INE231041238; BSE (Cash): INB011041257; BSE(F&O): INF011041257; BSE(CD); MSE(Cash): INB261041231;
MSE(F&O): INF261041231; MSE(CD): INE261041231; CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser: INA000007100. Motilal Oswal Asset
Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth
management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Commodities Broker Pvt. Ltd. offers Commodities
Products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products
Disclosure of Interest Statement
Analyst ownership of the stock
Tech Mahindra
No
1 November 2017
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