Dissecting Tech Mahindra Q3 FY'14

The book is cooked well.

These are the special recipes

1. A writeback of 226.69 Cr. from tax provisions carried by the erstwhile Satyam. The total provisions amount to 498.92 Cr, and suddenly the board decides that 272.23 Cr. is enough to be carried further as tax provisions. Why now?

2. A writeback of 120 Cr. on provisions for contingencies carried by erstwhile Satyam.Why now?

Euphemistic Answer : Professional Advice.
Reality : Q3 is not that good.

Here is the dissection

Operational Income : 4898.55 Cr - A sequential growth of 4.57%

Profit from Ops : 996.68 Cr. - 0.78% sequential growth

Forex Loss : 141.44 Cr. - Loss widens big time sequentially as against 26.06 Cr
This creates a hole in EBITDA : 927.37 Cr. down by 7.5% :) Now you know the reason for the special recipe!!

Add the 120 Cr. as a writeback/exceptional income. Please remember that this is only notional, but smells good :) !

And then the tax is 253.05 Cr. Now we have the writeback on tax provisions of around 226.69 Cr. This is the fizz. All empty calories! And this aided in pumping up the results straight at 1009.82 Cr.

And the actual PAT is 663.13 Cr (+- 20 Cr), which is actually down by 7.7%

But who really cares about what is inside?

Disclosure : I am long on TechM.