Davos 2024: Tech Mahindra To Grow BFSI At Outsized Pace, Says CEO Mohit Joshi

Tech Mahindra Ltd. aims to grow into a space where it has historically lagged peers by leveraging the decades of expertise its new CEO brings to the job.

“If you look at every IT services provider, BFSI (banking, financial services and insurance) is the single largest portion of their revenue pool. It is not for us,” Mohit Joshi, chief executive officer at Tech Mahindra Ltd., told NDTV Profit’s Niraj Shah on the sidelines of the World Economic Forum in Davos on Thursday.

“BFSI is a billion-dollar business for us, one that we will grow at an outsized pace over the next few years. I’m very confident, as it’s a business...like you said...I understand very well. I’m very comfortable speaking to boardrooms, chief investment officers, and business leaders about the change imperative in that business and how we can help.”

Joshi’s comment is significant as it comes exactly a month after he took the helm of Tech Mahindra from CP Gurnani, who achieved superannuation. Also noteworthy is the fact that Joshi joined Tech Mahindra after spending more than two decades at Infosys Ltd., where in his final role as president, he led the BFSI vertical—the biggest source of revenue for India’s second largest IT firm as well as the wider $245 billion industry. He also held executive responsibility for large deals, software and transformation initiatives.

But building the BFSI practice at Tech Mahindra is easier said than done, at least in the near term. The outsourcing industry is in the throes of a slowdown. Clients are cautious about what they spend on amid an evolving macroeconomic scenario in the United States—the biggest market for Indian software services firms. Discretionary spending, naturally, is largely absent.

The downturn reflects on Tech Mahindra’s earnings as well.

Revenue of the Pune-based IT services firm fell 2.25% over the previous three months to Rs 12,863.9 crore in the quarter ended September, even as operational profitability shrank 322 basis points to 3.55%—the lowest among top-tier peers. Tech Mahindra’s communications, media and entertainment vertical—which makes up more than a third of the top line—shrank 4.9%, while the BFSI vertical declined by 3%.

The company will declare its third-quarter earnings on Jan. 24.

Joshi called for a holistic approach to grow the business amid a downturn.

“The U.S. macroeconomic landscape is impossible to predict... but BFSI is seeing some signs of green shoots, manufacturing has stayed resilient, and telecom has had a brutal 2023,” he said. “Discretionary spending may return in 2024—in three months or six, is anybody’s guess. It is very difficult to predict the near term with any level of accuracy.”

Tech Mahindra has unique strengths in telecom and manufacturing, a robust healthcare and life sciences business, and emerging strengths in retail and logistics, he said.

“I feel the focus with which we are driving our large accounts and service-line innovations, and with the huge amount of support we have from our parents, I’m confident Tech Mahindra will continue to be a powerhouse.”