Tech Mahindra occupies a unique and uncomfortable position in Indian large-cap IT: it is the only company among the top five Indian IT firms to have reported revenue decline for two consecutive years (FY24 and FY25). While TCS, Infosys, Wipro, and HCL Tech all navigated the 2023-24 IT spending slowdown with flat-to-modest growth, Tech Mahindra contracted. Understanding why requires dissecting three simultaneous problems that converged at the worst possible time — and evaluating whether the new CEO's response addresses the root causes or merely the symptoms.
The Three Problems That Hit Simultaneously
Tech Mahindra's decline was not caused by a single factor. Three structural issues compounded each other. First, telecom vertical concentration: telecom clients (AT&T, BT Group, Deutsche Telekom, Telstra) account for approximately 30-35% of Tech Mahindra's revenue — the highest telecom concentration among Indian IT majors. Global telecom companies cut IT spending aggressively in 2023-24 as rising interest rates squeezed their capex budgets and 5G rollout spending plateaued. When your largest vertical spends less, you have limited ability to offset through other segments. Second, BPM margin drag: Tech Mahindra's BPM (Business Process Management) segment — call centres, back-office processing, customer operations — generates significantly lower margins than pure-play IT services. BPM revenue (~20% of total) earns EBIT margins of 6-8% vs 15-20% for IT services. As the overall revenue mix shifted toward BPM during the slowdown, blended margins fell disproportionately. Third, CEO transition at a critical moment: CP Gurnani's long tenure ended in 2023, and Mohit Joshi (former Infosys president) took over as CEO in mid-2023. Leadership transitions in IT services are always disruptive — client relationship continuity, deal pipeline confidence, and internal morale all suffer during handover periods.
- Revenue FY25: ~₹53,000 crore (down from ₹55,000 crore in FY23)
- EBIT margin FY25: ~8-9% (vs HCL Tech at 18%, TCS at 24%)
- Telecom vertical: ~32% of revenue (highest concentration risk in sector)
- BPM segment: ~20% of revenue at ~6-8% EBIT margin
- Headcount reduction: 5,000+ over FY24-FY25
- Dividend: ₹30/share (yield ~3% at current prices)
The Mohit Joshi Playbook: Project Fortius
Joshi's restructuring plan — internally called Project Fortius — has three pillars. First, margin recovery to 15% EBIT by FY27: from 8-9% today to 15% in two years. This requires a combination of headcount optimisation (already underway), offshore mix improvement, pyramid restructuring (hiring more junior engineers vs expensive senior hires), and selective exit from low-margin BPM contracts. Second, revenue growth restarted through AI services: Tech Mahindra is positioning itself as an AI-native IT services company — the "AI + IT" proposition targeting clients who want to use generative AI to transform their operations. This is the right narrative but execution is the question. Third, telecom vertical stabilisation: the telecom spending cycle has bottomed, and 5G enterprise use cases (private networks, network slicing, Open RAN) are creating new IT spending opportunities that play to Tech Mahindra's historical telecom depth. Use our BBS Stock Scorecard to compare Tech Mahindra's current metrics — EBIT margin, revenue growth, ROCE — against HCL Tech and Wipro. The gap between Tech Mahindra and its peers on every metric tells you how much execution the turnaround requires.
Valuation: What the Discount Is Pricing In
Tech Mahindra trades at approximately 22-28x trailing earnings — a significant discount to TCS (28-32x), HCL Tech (22-25x), and Infosys (22-26x). The discount reflects three uncertainties the market is pricing: (1) whether the 15% EBIT margin target is achievable in the projected timeframe; (2) whether AI services revenue is genuinely incremental or just repackaged existing IT services; (3) whether telecom clients return to growth IT spending or remain in austerity mode. If Joshi delivers 15% EBIT margin by FY27 and revenue returns to 10%+ growth, Tech Mahindra's earnings could nearly double from FY25 levels — making the current price attractive. If margin recovery stalls at 11-12% and revenue growth is 6-8%, the discount is justified and the stock is fairly valued. Compare Tech Mahindra's turnaround trajectory with our Axis Bank turnaround analysis — both are large-cap businesses with strong franchises trading at peer discounts due to recent execution failures. The analytical framework for evaluating both is similar: identify the root cause, assess whether management's response addresses it, and set clear metrics to track progress. Also read our Wipro vs HCL Tech analysis and TCS vs Infosys analysis for the competitive context Tech Mahindra is operating within. Use the BBS PE Analyser to build a normalised earnings scenario — what Tech Mahindra earns at 15% EBIT margin at current revenue vs what it earns growing revenue 10% — and assess whether the current PE adequately reflects the probability-weighted outcome. Our BBS courses on IT sector analysis cover how to read IT company financials and evaluate turnaround situations.
The Comviva Optionality
One asset the market rarely discusses in Tech Mahindra's context is Comviva — a subsidiary offering mobile financial services technology (mobile money, digital payments, airtime credit platforms) to telecom operators across 90+ countries in Africa, Southeast Asia, and the Middle East. Comviva is not listed separately, so its value is embedded in Tech Mahindra's consolidated market cap. As mobile money grows in emerging markets (M-Pesa model expanding across Africa), Comviva's platform business could be worth ₹5,000-8,000 crore on a standalone basis — value that is entirely invisible in a headline PE multiple comparison.
🔍 BBS Insight
Tech Mahindra is the highest-conviction turnaround bet in Indian large-cap IT — and also the highest-risk one. The business has genuinely strong assets: deep telecom relationships built over 25 years, a BPM business that provides revenue stability even if margins are low, and a new CEO with a track record of execution at Infosys. The risk is that the 15% EBIT margin target requires everything to go right simultaneously — headcount costs fall, AI deal wins accelerate, telecom clients recover, and BPM exits do not cause revenue cliff. The BBS tracking metric: watch EBIT margin every single quarter. The trajectory from 8% → 10% → 12% → 15% must be consistent and sequential. Any quarter where margin stays flat or declines should be treated as evidence that the restructuring is not working as projected. A sustained two-quarter margin plateau in FY26 would be the signal to reassess the turnaround thesis entirely.