Tech Mahindra has presented its strategy for achieving a turnaround by FY27, focusing on profitable and sustainable growth exceeding peer average. Key goals include an EBIT margin of 15% and a return on capital employed (ROCE) exceeding 30%. The strategy involves growth, operational efficiency, and organizational optimization with a revenue growth target of 1.3x from FY20 to FY27 and a policy of returning cash to shareholders at >85% of FCF.
FY27 Goals: The Recap
Tech Mahindra has laid out specific financial targets for FY27, signalling a clear path for investors. The focus is on robust financial performance and shareholder value.
Key targets include:
- Revenue Growth: Exceeding the growth rate of its peers.
- EBIT Margin: Achieving a margin of 15%.
- ROCE: Surpassing a 30% return on capital employed.
- Capital Return: Distributing over 85% of Free Cash Flow (FCF) to shareholders.
Strategic Roadmap to FY27
The company’s strategic roadmap is divided into phases, with a focus on stabilization:
- Phase 1 (Q4 FY24): Strategy definition.
- Phase 2 (FY25): Organizational restructuring and targeted investments in key areas.
- Phase 3 (FY26): Full integration of portfolio companies with increased operational focus on cost savings.
- Phase 4 (FY27): Expected returns and continuous pyramid improvements.
Growth Strategy: Prioritized Markets and Verticals
Tech Mahindra’s growth strategy is underpinned by several key vectors:
- Prioritized markets
- Balanced industry mix and focus on specific verticals
- Turbocharge program
- Large Deal Program
Metrics for success include improving Net Promoter Score (NPS), securing broad-based large deal wins and growing accounts valued at $20 million+.
Operational Strategy: Deepening Capabilities
The operational strategy centers around:
- Deepening Capabilities
- Delivery Excellence
- Productivity Gains
- High-margin Service Lines
The effectiveness of the operational improvements will be determined by delivering a consistent margin expansion, savings from Project Fortius and by strengthening the TechM Consulting arm.
Organizational Strategy: Culture & Synergy
Talent Management & Culture highlights a stable leadership team, and a focus on inclusive, innovation-focused and performance-based culture. The Group Synergy strategy encompasses R&D collaboration with Mahindra University, and increased synergy to enhance wallet share with key accounts. Tech Mahindra will also focus on creating innovation and co-creation in key next gen areas.
Source: BSE