Tech Mahindra sees worst day in over three years on Q3 profit miss

Mumbai, Jan 25 (Reuters) - Shares of India's Tech Mahindra fell as much as 6.3% to post their worst day in more than three years on Thursday after the company's third-quarter profit missed estimates.

The country's fifth-largest IT services company on Wednesday reported a 60.6% slump in profit to ₹510 cr ($61.4 million) for the three months ended Dec. 31, missing analysts' estimate of ₹617 cr, according to LSEG data.

The Pune-based company's operating margins contracted 660 basis points (bps) to 5.4%, the lowest among the top five Indian IT services companies. Meanwhile, new deal wins more than halved to $381 million.

This is the fourth straight quarter that the company has reported a double-digit dip in profit.

With the company undergoing restructuring under the CEO Mohit Joshi, analysts, while optimistic about the transition, see slippages in growth and expect the stock to underperform its peers.

The stock was down 5.7% at ₹1,327.15 as of 12:20 p.m. IST and was the biggest loser in the Nifty IT index, which is down 1.6%.

Jefferies, while raising its revenue estimate for Tech Mahindra by 1% over fiscal 2024-2026 has cut down its margin estimates by 100-180 bps over the same period to factor in the third-quarter profit miss.

Analysts expect the company's growth to be pressured in fiscal 2025 due to weak deal wins and low profitability, but see opportunities in the communications segment - its biggest - on the back of the broader 5G rollout.