Tech Mahindra Ltd has made another acquisition with the aim to cross-sell its services to a new set of clients. Of course, operating margin is low at high single-digit levels, but this is typical of US-based tech firms. And it seems unlikely that Tech Mahindra can bring about a meaningful improvement in margins, considering that HCI’s work is mostly done on site. While the better-than-expected growth in the past quarters suggests Tech Mahindra is firmly on the recovery path, not everyone is convinced. If earnings growth ends up being in single digits, as Nomura expects, the mid-teens price-earnings multiple looks overdone.

Source: Mint March 08, 2017 02:26 UTC