Can Mohit Joshi catapult Tech Mahindra into the big league of Indian IT?

A file photo of Mohit Joshi, the chief executive officer of Tech Mahindra. Joshi, an Infosys veteran, took over as the CEO in December 2023.  (Reuters)
A file photo of Mohit Joshi, the chief executive officer of Tech Mahindra. Joshi, an Infosys veteran, took over as the CEO in December 2023. (Reuters)


  • With $6.27 billion in revenue, Tech Mahindra is by no means small. But unlike its peers—TCS, Infosys, HCL Tech and Wipro—Tech Mahindra isn’t well diversified when it comes to business verticals. Mohit Joshi, the company’s new CEO, has a turnaround idea. But is it good enough?


New Delhi: Mohit Joshi, 50, is a man on a mission. He wants to transform Tech Mahindra and make it one of India’s top-flight IT services companies. Joshi, who took over as the company’s chief executive officer (CEO) late in 2023, got down to the task quickly. He has chalked out multiple strategies around margin improvement, cost optimization, and cross-selling services to existing and new clients. At the same time, he is looking to widen Tech Mahindra’s business beyond its core domain, telecom, and drive growth in BFSI (banking, financial services and insurance), manufacturing, life sciences and other verticals.

The rejig at Tech Mahindra comes in the wake of a less-than-spectacular performance by the company, which has consistently punched below its weight. The company’s Q4 FY24 net profit crashed 40.9% year-on-year (y-o-y) to 661 crore due to a slowdown in key verticals. Net revenue for the full year declined 5% to $6.27 billion, while net profit plummeted 52.2% to $284 million, down from $598 million a year ago.

To be fair, the last 12 months have been tough for the industry as a whole. But Tech Mahindra suffered a margin decline far worse than its peers. The company’s Ebit margin fell from 11.2% in March 2023 to 7.4% in March 2024, a decline of 380 basis points (bps). TCS’s Ebit margin rose 151 bps, while Infosys suffered a 94 bps decline; LTIMindtree, meanwhile, saw a decline of 164 bps.

With $6.27 billion in revenue, Tech Mahindra is by no means small. “But Tech Mahindra does not command the kind of position that a company of such scale should have," said Yugal Joshi, partner at Everest Group, a consultancy. That is something the top-tier IT services companies are capable of and Tech Mahindra is now making a serious attempt to break into that league.

The $250 billion IT services industry is fairly mature with companies such as TCS and Infosys counted among the leading global tech services providers. Even so, the current anaemic growth environment, slowdown in tech spending and artificial intelligence-led disruptions, which are resetting future growth drivers, give Tech Mahindra the space to refresh and reinvest to improve both its revenue and margins.

Joshi is looking to do just that. He aims to transform Tech Mahindra with a 36-month roadmap that will be the most disruptive change that the company has seen in its 38-year history, one with organic growth and deeper customer engagement at its core.

Vision 2027

Under the company’s Vision 2027 strategy, which Joshi unveiled during the earnings presentation, Tech Mahindra will look to achieve 15% growth in operating profit and higher revenue over the next 36 months. The vision includes a programme to get more business out of key accounts and another aimed at cost optimization. In the post-earnings call, Joshi said the company is seeking to increase its revenue “faster than the top six or seven IT firms".

The market has given the revamp plan a thumbs up with ‘buy’ calls on the stock increasing from 14 to 21 and ‘sell’ calls dropping from 18 to 14.

Positives of the revamp plan, according to Gaurav Vasu, CEO of Unearthinsight, a Bengaluru-based consultancy, include “doubling down on telecom, BFSI, healthcare; a realistic margin goal of 15% and a phased approach to the turnaround". The market has given the revamp plan a thumbs up with ‘buy’ calls on the stock increasing from 14 to 21 and ‘sell’ calls dropping from 18 to 14. Morgan Stanley has upgraded Tech Mahindra’s rating from ‘underweight’ to ‘overweight’. HSBC noted that the challenge will be in execution and kept a ‘hold’ rating with a price of 1,300.

But the hard part begins now. Can Joshi execute the plan and deliver the Vision that the market has bought into? If he does, Tech Mahindra will no longer depend on one vertical and instead become a diversified services provider, much like its peers. And it will get a position at the tech services high table, one that it covets, but that isn’t even within shouting distance.

Backoffice Origins

Back in 1986, Mahindra & Mahindra started a joint venture with British Telecom as a technology outsourcing firm. At the time, the company was called Mahindra British Telecom (MBT). Later, it was renamed as Tech Mahindra. In December 2012, British Telecom sold its remaining 9.1% shareholding in MBT and exited the joint venture. But the company’s telecom focus continued and today it remains the largest vertical, accounting for around 36% of Tech Mahindra’s business.

“Tech Mahindra’s growth was led by telecom when it was a sunrise industry and created digital disruption across countries. However technology budgets have remained stagnant for large telecom players and Tech Mahindra has also experienced increased competition in the space," observed Unearthinsight’s Vasu.

Historically, single-vertical companies have been unable to build more diversified practices. A lot of the companies in the Indian tech services domain, such as iFlex (later acquired by Oracle Financial Services), Polaris, Nucleus Software and others could not expand much beyond their core vertical of financial services.

During Tech Mahindra’s Q4 2024 post-earnings call, Joshi said, “We are mindful of the fact that we have not delivered predictability of our financials in the past. We’re now very focused on driving that predictability. There will be volatility through FY25 since we’re in the middle of a turnaround, but everything that we’re doing right now is focused on bringing that volatility down."

In 2023, Manish Vyas, who was spearheading the telecom vertical, quit to join private equity-backed Prodapt, which is headquartered in Chennai. Another senior executive, Satish Pai, quit to join consulting major Deloitte as partner. Other Tech Mahindra veterans, including Jagdish Mitra, who spearheaded strategy and Vivek Agarwal, head of corporate development, have also quit the company in recent months.

Leadership Rejig

For Tech Mahindra the way ahead will be to widen rather than shrink telecom and other verticals, says Atul Soneja, the company’s chief operating officer (COO). “However, the percentage of telecom will come down as others increase in the overall pie," said Soneja, 51, who joined Tech Mahindra 10 months back from Infosys, where he held various positions over 25 years, spearheading the BFSI vertical for about eight of them. Tech Mahindra did not have a COO before Soneja joined and this critical role will help in strengthening the company’s operations.

Atul Soneja, Tech Mahindra’s chief operating officer.
View Full Image
Atul Soneja, Tech Mahindra’s chief operating officer.

Apart from Soneja, Joshi brought in Richard Lobo, another Infosys veteran to spearhead HR early this year. The company’s chief people officer, Harshvendra Soin, was elevated as president and now heads the Asia Pacific Japan region from Australia. Peeyush Dubey, another Infosys executive, who has also had stints at LTIMindtree and an AI analytics firm was roped in by Joshi as chief marketing officer last November.

Joshi, a history graduate from Delhi University’s St Stephen’s College with an MBA from the Faculty of Management Studies, Delhi, began his career at ANZ Grindlays Bank before joining Infosys, where he spent almost 23 years and was president overseeing the BFSI business. Joshi’s wide experience at India’s second-largest IT services provider is expected to come in handy as he seeks to transform Tech Mahindra over the next three years.

Three-year Vision

FY25 will be a pivotal year in the company’s attempt to turn itself around.
View Full Image
FY25 will be a pivotal year in the company’s attempt to turn itself around. (Reuters)

Tech Mahindra’s revamp will focus on organizational restructuring, improvements and investments. It will also look at harnessing synergies with other Mahindra Group businesses in verticals such as manufacturing, where the group has a strong presence.

Under the plan, said Soneja, FY25 will be a pivotal year in the company’s attempt to turn itself around and it will focus on engaging with its largest customers and building on its business with them. FY26 will be the stabilization phase, during which it will continue these efforts and develop key businesses, including telecom, manufacturing, BFSI and AI. By FY27, Tech Mahindra expects to get ahead of its peers and start reaping returns with accelerating revenue growth and an Ebit margin of 15%.

Under Vision 2027, the company’s Turbocharge and Fortius initiatives will play a key role in driving growth. Project Fortius, which means ‘stronger’, will use multiple levers to improve margins, utilization, offshoring and productivity, and reduce costs. The company will focus on organic growth, which will allow it to invest in new capabilities and help build new revenue-contributing verticals by FY26.

Interestingly, this is a departure from the acquisition-led strategy that the company has pursued for many years. “We are changing our capital allocation policy to pursue organic growth rather than acquire assets. You can never say no to a good buyout target but that is not our focus. We want to build new capabilities within the organization," said Soneja.

According to investment tracker Tracxn, Tech Mahindra has made 36 acquisitions, spending $1.69 billion on the buyouts. These include Lodestone and BrainScale (both in 2021), Thirdware and Geomatic.AI (both in 2022) and Orchid Cybertech, a provider of customer experience solutions, in February 2024.

There’s no way we are going to defocus or deprioritize telecom. — Atul Soneja

The company’s Turbocharge programme will focus on its top clients (who bring in $20 million or more in revenue annually)—doing more for them, adding value and getting a bigger bang for its buck. Under this programme, a dedicated internal strategy team will focus on top accounts to drive high growth.

Beyond telecom, the company wants to drive businesses from other segments, including manufacturing, healthcare & life sciences and banking & financial services, where both Soneja and Joshi have deep expertise, having run these businesses at Infosys. For Tech Mahindra, BFSI in the quarter ended March 2024 stood at $253 million, almost 9x smaller than TCS’s $2.3 billion and 5x smaller than Infosys’ $1.2 billion in the same quarter.

“We believe some of the nextgen capabilities in AI and GenAI are in high demand in areas like BFSI and if they have to scale at speed, we can be leaders in that," said Soneja. He believes this is where Tech Mahindra can leapfrog some of the competition.

By FY27, Tech Mahindra expects to get ahead of its peers and start reaping returns with accelerating revenue growth and an Ebit margin of 15%.

But even as Tech Mahindra tries to expand its non-telecom verticals, telecom remains the heart of the company. “There’s no way we are going to defocus or deprioritize telecom," said Soneja. The company’s telecom business (telecom, communications and entertainment) marginally increased from $653 million in March 2022 to $668 million in March 2023 and decreased to $558 million in the quarter ended March 2024. For TCS it was $489 million in March 2022; $511 million in March 2023 and $486 million in March 2024. For Infosys, it was $548 million, $537 million and $561 million, respectively, in the same period. While Tech Mahindra will continue to grow the telecom business, if the turnaround plan succeeds, the sector’s overall share will reduce from the current 36% as other verticals become bigger.

Execution Challenge

Despite the positive outcomes that Tech Mahindra is hoping for, it may not be smooth sailing. In its core domain, telecom, communications and media, the technology budgets of large telecom players have remained stagnant. There are pockets with high margins but a lot of the business is commodity-type, low-margin work. To be sure, this year looks better than the last fiscal year but clients continue to be cautious about spending on new tech. This could adversely impact Tech Mahindra’s plans to expand its manufacturing, BFSI and other businesses.

“In the next 12-18 months, competitors will be building their AI/GenAI capability and while Tech Mahindra will be focused on turnaround, it might lose out on positioning itself as an AI/GenAI first player," said Unearthinsight’s Vasu.

But Tech Mahindra is playing down the risks. “In our Vision 2027 we have factored in the risks to a large extent. There are obviously unknown factors, which could be a geopolitical, pandemic kind of situation. Also, customer spending is still weak, but based on what we know, this year is going to be better than last," said Soneja.

Tech Mahindra wants to focus on building AI inhouse. It is imparting AI skills to its trainable workforce. As of now, 45,000 have been trained on foundational AI technologies, including Generative AI.

Will it Work?

If the recent history of leadership changes at technology services companies is anything to go by, the turnaround plan may just work. “Companies that have attracted senior leaders from much larger IT services companies have managed turnarounds quite successfully," said Ramkumar Ramamoorthy, partner, Catalincs, a growth advisory firm. For example, ITC Infotech, Mindtree, LTI Infotech, Firstsource, Hexaware, Coforge and WNS attracted heavy hitters from larger companies such as Cognizant, Infosys, HCL, Syntel and Genpact.

The reason for the turnaround is that “these leaders have the ability to cross-pollinate best practices in governance, risk management, organizational structure, deal wins, client relationship management, delivery management, sales and marketing, among others. And given their long and successful track record, they have the ability to inspire multiple generations of employees within the company, rev up the mojo fairly quickly, and align everyone to a shared purpose," added Ramamoorthy.

Even Salil Parekh came from a much-larger Capgemini to lead Infosys. But a strategy will work only if it is executed well. The quarterly numbers that Mohit Joshi rolls out over the next three fiscal years will be closely watched.

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.