Tech Mahindra has chosen Mohit Joshi, former head of the BFSI vertical of Infosys, as the new CEO and MD with effect from December 20, 2023 for five years. He will join the company well before to ensure a smooth transition, ahead of current CEO and MD CP Gurnani’s retirement on December 19.
Mohit has over two decades of experience in the enterprise technology software & consulting segment, and has worked with large corporations to drive digital transformation and build thriving businesses. At Infosys, Mohit was head of the global financial services & healthcare and the software businesses.
Lifting margins structurally in medium term: A key ailment in TechM’s operating performance has been volatile and lower-than-peers margin. While some factors behind the low margin have been high onsite effort mix, higher dependence on subcontractors and business mix , there have been issues around margin erosion due to a mixed history of acquisitions. We think Joshi’s focus would include taking steps to reduce these headwinds structurally.
Do not expect any immediate strategy change: We think the new CEO is likely to spend first few quarters in meeting clients, employees and partners along with Gurnani. Gurnani hinted at a customer-focused strategy, including new products and platforms focus, at the analyst day on March 3. Maintain ‘buy’, target price Rs 1,260: We maintain the ‘buy’ rating and target price of Rs 1,260. The stock is currently trading at ~13.5x FY25F EPS. Key risks include weak revenue growth and continued margin pressure.