Motilal Oswal has given Neutral recommendation for Tech Mahindra with a target price of Rs. 1910 in its research report issued on Jan 17, 2022

Motilal Oswal’s research report on Tech Mahindra

TECHM has announced the acquisition of Com Tec Co IT (CTC), an East European IT Services company with a presence in the Digital engineering and outsourced product development space, for EUR310m. -CTC services clients in the Insurance vertical, which should strengthen TECHM’s capabilities in that space. It has development centers in Eastern Europe (Latvia and Belarus) and has a workforce of 720. TECHM has also acquired a minority stake (25%) in two group SaaS companies (SWFT and Surance) for EUR20m, along with an option to acquire an additional 20% at current levels. CTC had a revenue of EUR36.6/EUR57.6/EUR71.3 in CY18/CY19/CY20, implying ~40% CAGR, although the growth has progressively moderated. It posted a revenue of EUR58.8m for the nine months ended Sep’21, implying a run-rate of ~EUR80m in CY21 (1.5% of TECHM’s FY22 revenue). As per the management, CTC has industry-leading EBIT margin and will be accretive on an EPS, RoE, and FCF basis. While TECHM has not shared additional details, our rough estimates suggest a PAT accretion of less than 1% to our FY23 estimate.


We expect TECHM to deliver mid-teens growth in FY22. We value the stock at 22x FY23E EPS. We remain Neutral on the stock.

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