Tech Mahindra Ltd (TECHM) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator: Ladies and gentlemen, good day and welcome to Tech Mahindra Limited Q2 FY27 Earnings Conference Call. We have with us today, Mr. Mohit Joshi, Managing Director and Chief Executive Officer; Mr. Rohit Anand, Chief Financial Officer; and Mr. Atul Soneja, Chief Operating Officer. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Joshi for his opening remarks. Thank you and over to you, sir.
Mohit Joshi (Tech Mahindra Ltd): Thank you, and thank you all for joining us, and welcome to our Q2 FY27 earnings call. I just wanted to begin by highlighting a significant milestone in Tech Mahindra's journey as we celebrate our 40th anniversary this quarter.
Mohit Joshi (Tech Mahindra Ltd): to change. From our roots in telecommunications, we have grown into a global technology company, offering AI-powered technology consulting and digital solutions to global enterprises across industries. Through all this change, the entrepreneurial spirit that shaped Tech Mahindra has endured. It drives us to pursue new opportunities, build for the long-term, and keep learning at our heart. We believe that technology must create meaningful value for our clients and communities. Today, that spirit finds its clearest expression in our promise to help clients scale at speed. As we mark this milestone, I am also pleased to announce that our Board of Directors has recommended a bonus issue, bonus share issue in a ratio of 1:1 for our shareholders. Turning to our quarterly performance, we delivered a very strong quarter with broad-based growth across the business. Revenues were US$1.693 billion, representing 6.8% year-on-year growth on a reported basis and 7.2% growth in constant currency. Positive momentum across our verticals and the ramp-up of large deals supported this performance, and we are now winning share based on our talent investment and their focus. We have above-industry tenured staff focused on delivering business outcome-oriented solutions to our clients. Operating margins for the quarter stood at 14.8%. From a vertical perspective, in communications, revenues grew 9.5% year-on-year, supported by the ramp-up of the Orange large deal and new strategic engagements. We continue to see opportunities across AI-led trans- operational transformation, fiber and network modernization, and B2B platform modernization. We also believe the next wave of cost transformation will be driven more by technology-led transformation beyond merely AI benefits and labor arbitrage, which plays to Tech Mahindra's strengths and deep telecom expertise. In this quarter, we launched Zero Gravity Telco Architecture, our North Star framework, enabling telecom operators to reduce enterprise gravity by addressing the architectural constraints that limit safe AI agent deployment, supporting their transition to AI-native operations. This is a timely and differentiated capabilities, especially in light of widespread and heightened concerns about security and reliability of AI agents. The BFSI business grew 4.6% year-on-year. We remain focused on deepening our presence in payments and wealth management, modernizing client platforms, and strengthening our insurance capabilities. During the quarter, we were recognized as a global leader in the ISG Guidewire Services Ecosystem 2026 study for the first time, reflecting the progress we have made in insurance. Manufacturing grew 7% year-on-year. Aerospace saw good traction supported by engineering demand and industrial opportunities centered on AI-led efficiency, supply chain visibility, and system consolidation. Hi-Tech grew 6.7% year-on-year supported by new deal wins. AI-led product engineering and platform modernization are driving demand. At the same time, cost optimization and consolidation initiatives continue to support a healthy pipeline. Retail, travel, and logistics grew 9.2% year-on-year, supported by new client wins and the ramp-up of consolidation and transformation engagements in the Americas. We continue to see opportunities to expand our share within existing accounts and help clients strengthen the infrastructure, data, and platforms needed for AI adoption. Healthcare grew 6.2% year-on-year. Our focus remains on expanding our presence across providers and life sciences, with vendor consolidation and AI-led transformation as key areas of opportunity. We are building on our AI solutions portfolio and ecosystem partnerships to support clients in areas such as post-market surveillance and regulatory compliance. Coming to the progress we made under TechM Helix, our AI initiative this quarter, we strengthen the platforms, partnerships, and industry capabilities that underpin all of our AI offerings. Our Helix investments are translating into strategic engagements across industries and geographies, with many moving beyond pilots towards larger scale implementation within core business processes. During the quarter, we secured AI engagements across professional services, healthcare, insurance, communications, consumer health, and technology. Let me share examples to illustrate how clients are approaching AI as part of a broader business transformation. A European professional services firm, for instance, selected us to embed AI and agentic AI across more than 40 customer-facing platforms and products and modernize software engineering, displacing a longstanding incumbent. Secondly, a US healthcare technology leader engaged us to deploy a multi-agent AI solution across its post-market surveillance complaints life cycle, accelerating triage while preserving traceability, regulatory governance, and expert oversight. And thirdly, an APAC communication and media provider selected us to transform customer experience operations, embedding AI agen-
Mohit Joshi (Tech Mahindra Ltd): across voice and digital interactions, agent assistance, quality, and knowledge management. For us, the opportunity being enabled by our latest offerings is not simply to deliver existing work more efficiently, but to take on a wider scope of responsibility and help clients achieve better outcomes. Helix brings together our industry knowledge, engineering expertise, and enterprise integration capabilities to support this shift. I will now share three examples of how Helix is bringing together our industry knowledge, engineering expertise, and enterprise integration capabilities to deliver changes. Our work with AWS demonstrates this in practice. We launched an Agentic Process Transformation Center of Excellence, whose first solution, Collections Guru, is already deployed at Target Group. It delivers approximately 40% efficiency gain in arrears management, a measurable improvement in a live business process. Secondly, our zero-gravity telco architecture is gaining traction, a Tier 1 UK operator is progressing a proof of value trial, two European mobile network operators are evaluating adoption and a leading Asian operator is deploying pilots. The accompanying zero-gravity index benchmarks AI readiness and guides investment priorities while collaboration with hyperscalers, Nvidia, and TM Forum supports adoption. Potential benefits include reductions of 50% to 80% in time to market, 15% to 30% in technical debt, and 25% to 50% in architectural costs. Thirdly, we launched a consumer Agentic Experience Studio, an immersive center showcasing end-to-end solutions across the consumer industry value chain. Since its launch, it has hosted more than 20 customers and multiple partners and begun generating business in its first quarter of operations. The studio has also helped us deep in our partnerships with Google, SAP, and Blue Yonder, strengthening our cloud, AI, digital supply chain, and enterprise transformation capabilities. Our broad partnerships complement these investments with the integration and security needed for enterprise deployment. They also help us develop capabilities that can be applied across client engagements and enhanced over time. Here are four examples of additional work with Here are four examples of additional work with partnerships. With ServiceNow, we have announced an expanded multi-year partnership to help enterprises move from AI pilots to production scale deployments. With Cisco, we announced an AI-driven Security Service Edge offering to reduce security complexity, improve visibility and control, and help enterprises manage and secure AI agents as they scale cloud and hybrid work, and AI adoption. Our partnership with spacex.ai combines industry expertise, engineering excellence, and AI innovation to bring organizations to help organizations transform software development into a competitive advantage. By bringing together spaceX's AI native platform and Tech Mahindra's deep domain knowledge, engineering skill, and transmission expertise, this partnership reinforces our AI-delivered drive strategy. Finally, we continue to invest in technologies with a longer horizon. Makers Lab, which marked its 12th anniversary this quarter, remains an important part of this effort. In quantum technologies, we partnered with IHub Quantum Technology Foundation to develop middleware for India's indigenous 20-qubit trapped-ion quantum computer. Completion is expected by December 2026, with commercialization activities expected thereafter. We also won the first prize, and I'm really proud of this, at the Fifth Quantum Hackathon organized by possibly the world's leading Quantum Institute, the National Quantum Computing Center, working alongside talented university participants to tackle a network optimization challenge using quantum computing. Coming to deal wins, our total deal wins for the quarter were US dollar 1.023 billion. Wins were broad-based across verticals and geographies. For instance, we were selected by a leading Canadian insurer as a strategic partner for an integrated applications management services engagement, spanning core insurance applications, vulnerability management, environment services, release engineering, and run operations. The engagement will strengthen platform modernization, improve operational efficiency, strengthen security, and enhance observability. We were selected as a leading digital by a leading digital network business to deliver a transformative mainframe-as-a-service program, supporting critical communications infrastructure, leveraging Tech Mahindra's strengths in infrastructure transformation, managed services, automation, and telecom domain expertise. The engagement will help deliver reliable connectivity services across the UK. We were also selected by a leading Australian telecom operator as a strategic managed services partner for a five-year engagement spanning application management, development, testing, and AI engineering services. This is obviously enabled by our proven experience in AI engineering services and managing mission-critical technology environments. I will close where it begins, with our talented staff. None of what I've described happens without them. We were recognized this quarter at the Brandon Hall HCM Excellence Awards and the Stevie Awards for Great Employers. These recognitions are important, but what matters most is the work behind them.
Mohit Joshi (Tech Mahindra Ltd): must invest not only in technology capabilities, but also in creating meaningful opportunities for people to learn, contribute and grow. I wanted to close with our Global Chess League, season 4 in Bangalore, which delivered nine days of world-class chess and a truly global audience. Chess brings together imagination, discipline, patience, and adaptability. It rewards the ability to look beyond immediate moves while responding thoughtfully to a changing position. As Tech Mahindra completes 40 years, those qualities offer a fitting perspective on the journey ahead. We will continue to build on our strengths, learn and adapt while staying focused on the commitments we we make. Also on the GCL piece, I just want to mention that through the, through our GCL app, we are also transformed how audiences connect with the sport while bringing together leading partners including SBI, AMD, Google Cloud, and many others. And with that, I will hand you over to Atul, who will take you through our operational transformation and AI progress for the quarter.
Atul Soneja (Tech Mahindra Ltd): Thank you, Mohit, and hello, everyone, and thanks for joining in. So AI is reshaping the economics of technology services. The market is rapidly moving from AI experimentation to enterprise scale adoption. Our focus at Tech Mahindra is to help clients translate AI investments into measurable business outcomes through improved productivity, accelerated innovation, and sustainable value creation while embedding AI into a structurally more efficient delivery model. With Helix, our AI journey is moving decisively from capability building to scaled execution. Helix is becoming the agent for AI-led transformation across TechM, connecting innovation to execution, productivity and growth. Our strategy is to build an AI growth engine under Helix, which has two complementary dimensions: AI tool chain for every service line, which is around embedding AI into how we design, engineer, modernize, deliver, and operate technology services, and second is around AI transformation for every vertical, which is around applying AI to reimagine industry-specific business processes, operating models, and customer experiences. Let me just give you a few concrete examples. An example of AI tool chain is when a Tier 1 telco operator in Europe expanded its partnership to build a private cloud platform using platform engineering and AI-first operations. The strategic relevance is that AI becomes embedded in the operating fabric of clients' infrastructure, creating a scalable foundation for productivity gains, automation, and long-term business value, rather than a stand-alone technology initiative. An example of a cross-service AI foundation tool chain is TechM Orion and the Orion marketplace, which leverages TechM's AI IP and reusable agent capabilities, enabling service lines to accelerate AI adoption from a common platform, rather than building solutions independently. Let's now consider the AI transformation for every vertical. For Telecom, we established a zero gravity architecture, which enables a diagnostic framework to help telcos overcome legacy complexity and move towards autonomous operations. We partnered with FICO in banking domain for AI-powered decisioning. In manufacturing, we partnered with Infinite Uptime to bring prescriptive intelligence into plant workflows. These examples show progression from generic AI capability to industry-specific intellectual property, solutions and transformation offerings. Our zero gravity architecture for Telecom is an example of the above convergence. It brings together AI-ready architecture, enterprise context, and agentic capabilities to simplify complex telco environments and enable intelligent operations across networks, customer journeys, and business processes. Our customer agentic experience studio accelerate solutions across Retail, Consumer, Travel and Logistics. Our model strategy is evolving into a family of multimoble- multimodal, purpose-built models, and Orion provides a model-agnostic Enterprise AI Platform that brings together these capabilities across a growing partner ecosystem. Our portfolio includes more than 200 AI assets, which we are rationalizing into reusable blueprints
Atul Soneja (Tech Mahindra Ltd): platforms and accelerators. During the quarter we completed 25 prioritized industry and horizontal AI use cases, while progressing more than 100 additional vertical use cases across communications, financial services, healthcare, manufacturing, retail, energy, insurance, travel and logistics. Last time we spoke about domain specific language models. Our focus was on establishing the foundational capability to build smarter, efficient, and specialized AI models to ensure our customers get the benefit of doing a specific task in a domain or a sub domain effectively. Since then we have extended this capability and we are now seeing opportunities in three separate directions. First, DSLMs are now part of AI tool chains. DSLMs enter these AI tool chains as an important component which helps us deliver these transformations keeping them cost effective. Our AI tool chains built specifically for industries now have these DSLMs embedded within them. Second, from language models to agentic business processes. Our focus is no longer just on building a model that can answer industry specific questions. We are combining DSLMs with AI agents that can understand enterprise processes, reason over domain information, and take governed actions within customer environments. And third, from technology develo- development to commercialization. We're connecting our domain specific AI capabilities with our broader agentic AI platforms, industry solutions, and delivery ecosystem for repeated enterprise offerings. In short, we have progressed from building models to building domain specific intelligence that can drive business actions. That is where we believe the long term value creation opportunity lies. Trust is a fundamental to scaling AI. Responsible AI is embedded throughout the solution life cycle with red teaming, trusted data, traceability, security, and IP provenance built into how we design, deploy, and operate AI solutions. We have also established a dedicated responsible AI practice spanning across consulting, delivery, and talent enablement, which is helping us strengthen our ability to help clients move from experimentation to production with more confidence. We are also moving decisively from co-sell to co-create, which is around combining Tech Mahindra's domain depth, engineering excellence, deep client relationships, and global delivery scale with inherent strength of our partners to build differentiated solutions and unlock greater client value. This is already taking shape through Cloud and AI innovation with Google Cloud, AWS, and Microsoft. Intelligent Enterprise transformation with SAP, ServiceNow, and Salesforce. AI infrastucture infrastructure and edge solutions with NVIDIA, Dell, Intel, and Qualcomm. Across these and many more partnerships we are not no longer simply taking products to market together. We're jointly creating industry solutions, talent, accelerators, and new sources of measurable busi- business value for our clients. The impact is visible across industries. In Banking, AI-enabled service operations are supporting stronger conversion and growth. In Healthcare, multi-agent workflows are addressing high-volume product safety processes while keeping specialists in the decision loop. In Insurance and Telecom, AI-Ops, self-healing operations, and embedded agents are improving responsiveness and in operating efficiency. In Engineering, AI-assisted development and testing are shortening cycle times and improving release readiness. AI is not only transforming client operations, it is also redefining the economics of service delivery. Across clients' fixed-price and outcome-based programs, we are intensifying the use of AI to improve productivity, optimize delivery effort, and strengthen execution economics. Our focus is on systematically embedding AI into how work is delivered, enabling us to deliver more efficiently, improve margins, and scale proven practices across the account base. Our biggest currency is our talent, which continues to scale alongside execution. More than 24,000 associates have been upskilled on AI productivity tools,
Atul Soneja (Tech Mahindra Ltd): AI Velocity Cells, a new program we started to bring these capabilities closer to the client demand, has already delivered 16 relevant client-relevant capstones in seven weeks and operating at full allocation. These teams are designed to demonstrate value quickly and industrialize successful solutions across our service lines. As the world moves towards smaller domain contextual models, it is imperative that our workforce gets trained on it because of the multitudes of open models. We have curated a special internal course to ensure 200 engineers get trained in the next quarter on some deep techniques to hone models and harnesses. Let me also address the broader economic implications of AI for our industry. AI is and will change the economics of technology services. In some areas, automation will reduce the effort required to deliver existing services and may put pressure on effort-based revenue models. But we're also seeing significant momentum in work related to consulting, modernization, data, and analytics as our clients accelerate their AI journeys. All of this translates to expanding scope within existing clients, accelerating transformation demand, supporting higher volumes, winning new clients, and evolving our new commercial models. This positions us to participate more directly in the value we create for our clients rather than measure progress only in units of effort. Let me close with our approach to AI revenue. We have established a framework across three value pools: Build the Enterprise, Create Intelligence, and Run and Scale with Confidence. The first category, which is Build the Enterprise, includes consulting, AI foundations, and transformation. The second, Create Intelligence, covers enterprise intelligence and agentic orchestration. The third, Run and Scale with Confidence, includes AI operations, trust and assurance, and frontier innovation. Our principle is simple. AI revenue must be evidenced by client-funded work and reconcilable to financial records. The validation process spans sales, delivery, and finance, distinguishing direct AI revenue from AI-influenced pipeline and internal productivity benefits. We expect to introduce AI revenue reporting as part of our H2 FY '27 disclosures and continue it on an ongoing basis, refining the methodology as our portfolio and the markets mature. To conclude, our ambition goes beyond participating in the AI opportunity. It is to establish Tech Mahindra as a differentiated, AI-led transformation partner, delivering measurable business outcomes for clients, driving structural improvements in productivity, and creating a foundation for sustained profitable growth. Project Helix is the engine of this transformation, bringing together AI toolchains across every service line and AI-led transformation across every industry vertical. This is what AI Delivered Right means for Tech Mahindra: turning AI from a technology opportunity into a scalable business advantage to our clients, our people, and our shareholders. Thank you, and with this, I hand over to Rohit for detailed financial performance commentary.
Rohit Anand (Tech Mahindra Ltd): Thanks Atul. Good evening everyone, and thank you all for joining. We delivered another strong quarter with broad-based growth across verticals and geographies, 12th consecutive quarter of margin expansion, and new deal wins exceeding a billion dollars. Reported revenue stood at 1693 USD million, up 2% Q-o-Q and 6.8% Y-o-Y on a reported basis. On a constant currency basis, revenue grew 2.4% Q-o-Q and 7.2% Y-o-Y. Organic revenue grew 2.3% Q-o-Q and 7% Y-o-Y in constant currency. Revenue in INR terms stood at 16,180 crores, up 3% Q-o-Q and up 15.6% on a Y-o-Y basis. Communication business grew 6% Q-o-Q, supported by ramp-up of large deals and strategic new engagements. Retail, Transport, and Logistics grew 9.6% driven by scale-up of new deals and growth in existing accounts. Technology, Media and Entertainment grew 2.8% Q-o-Q, followed by Healthcare and Life Sciences at 1.4%.
Rohit Anand (Tech Mahindra Ltd): European Automotive program in the prior quarter, which I had mentioned last time. A sequential revenue headwind associated with the program is expected in Q3 as well, though to a much smaller extent. Our total deal win for the quarter stand at 1,023 million US dollar. On a last 12 month basis deal win stand at 4,270 USD million, up 34.8% YoY. The momentum in the deal wins was broad-based across verticals, across geographies through Comms, BFSI, Manufacturing, and Retail, logistics and Transport verticals. EBIT for the quarter stood at 250 million with an EBIT margin of 14.8%, up 40 basis points on a QoQ basis and 260 basis points on a YoY basis. The margin improvement was driven by strong volume growth and Project Fortius savings partially offset by the wage hikes. In rupee terms, operating profits stood at 2,387 crores, up 40.5% YoY, aided by INR depreciation. Effective tax rate for the quarter came in at 29.9% due to a one-time tax adjustment related to prior period tax matters. Excluding this one-time item, our tax rate was 26.6%. Profit after tax for the quarter was 166 million US dollar representing a 23.2% increase YoY. In INR terms, profit after tax stood at 1,586 crores with a PAT margin of 9.8%, an expansion of 130 basis points on a YoY basis. We generated 135 million of free cash flow during the quarter. Although the cash flow this quarter was impacted by ramp up of the new rebadged deals which we, which will normalize the next quarter. We reiterate our stance to maintain 90 to 100% free cash flow to PAT on a full year basis. DSO stands at 88 days, up four days QoQ, but down six days on a YoY basis. I will now share highlights of our progress in making AI era investments. We continue to strengthen TechM Helix through strategic investments in industry solutions, engineering capabilities, and our people. Zero Gravity Telco architecture and consumer Agentic Experience Studio are part of this effort to make AI more relevant to clients' business needs. We established the Toronto Innovation Hub to bring together client co-creation and AI innovations. Additionally, we launched the Engineering Experience Center to help organizations move faster from concept to commercialization of their products. This builds on our investment in Manufacturing Experience Center, Communication Experience Center, and Retail, CPG Experience Center, which, each center focusing on distinct technology and transformation needs for the industries we serve. We're also investing in AI models built for specific industries and sovereign requirements. Our focus is on solutions that understand client's business context, give them greater control over the data, and make AI more practical and cost effective to deploy. In this quarter, we launched Indus Tera, a 30 billion parameter model built with NVIDIA and AWS, a part of India AI Mission. A key part of our AI investment is in deploying our workforce to support AI led delivery. We introduced an AI driven, skill led model, linking career progression to capability, domain proficiency, and AI fluency. Our hedge book as of September end stands at 0.4 billion. Under hedge accounting guideline, the mark-to-market movement was 13.83 million US dollars, of which 8.7 million was recorded in the P&L and 5 million reflect in reserves. Our hedge book stands at less than 12 months in line with the change hedging guidelines. Our return to capital employed stood at 31.2% for the quarter, reflecting a sequential improvement of 290 basis points. On a YoY basis, the ROCE improved by 680 basis points. The Board has declared an interim dividend of ₹15 per share, reaffirming our commitment to the laid out capital allocation policy of returning 85% and above of free cash flow back to shareholders. To sum up, our Q2 performance reflects execution of our strategy and the continued trust of our clients amid an evolving macroeconomic environment. We will continue to invest in capabilities that address clients needs and application across engagements while maintaining financial discipline, support sustain profitable growth. We reiterate that we remain on track to achieve our full year FY27 EBIT margin target of 15%. As we mark our 40th anniversary and we recognize the strength build over this journey, enduring client relationships,
Rohit Anand (Tech Mahindra Ltd): industry expertise and the ability to adapt through successive waves of change. Our task now is to build on these strengths and translate them into consistent business performance, while building a stronger business for the three years ahead. In closing, I would like to thank our shareholders who have been an integral part of this journey. As Mohit shared earlier, the board has recommended 1:1 bonus share issue, allowing us to mark the anniversary milestone with them for their continued trust and support. Our commitment to our shareholders remains to build long-term value through disciplined execution and sustained financial performance. We can now open it up for question and answers.
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