Release Date: April 21, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mastek Ltd (BOM:523704, Financial) reported a 13.1% growth in overall revenue from operations for the year.
- Net profit for the year increased by 20.9% compared to the previous year.
- The UK and Europe business experienced a significant revenue growth of 17.2% year-on-year.
- The healthcare sector, particularly with NHS in the UK, saw more than 100% growth year-over-year.
- The company declared a final dividend of INR16, culminating in a cumulative dividend of 480% for the year.
Negative Points
- The North America business saw a quarterly revenue drop of 8%, despite a year-on-year growth of 16%.
- Margins in the UK have been impacted due to newer areas of data and AI work, leading to lower initial margins.
- There is a reset in the North America business focus, which may take time to stabilize and grow.
- The overall 12-month order backlog grew only by 1.7%, indicating slower growth in new orders.
- The company is facing near-term uncertainties in the US market due to macroeconomic changes and insourcing by clients.
Q & A Highlights
Q: Could you explain the significant drop in margins in the UK geography and how you see this evolving?
A: The CEO explained that the drop in margins is due to the shift towards newer areas like data and AI, which initially have lower margins. The company is working on building capabilities and expanding offshore operations to improve margins. In the short term, margins might remain impacted, but overall profitability is expected to grow.
Q: What is causing the disconnect between the positive outlook and the flat 12-month order backlog?
A: The CEO clarified that while the reported backlog growth is 1.7%, there was a $15 million contract closure in early April not included in the figures. Including this, the backlog growth would be closer to 7-8% year-on-year, indicating a timing mismatch rather than a lack of demand.
Q: How is the macroeconomic uncertainty in the US affecting your business, and what are your plans for growth there?
A: The CEO noted that macroeconomic changes are causing some clients to insource work and delay deals. The company is restructuring its US operations, focusing on data and AI capabilities, and working closely with clients to align with their needs. The aim is to navigate current uncertainties and position for long-term growth.
Q: Can you provide more details on the Oracle business growth in the US and its drivers?
A: The CEO highlighted that the Oracle business grew by over 50% year-on-year, driven by strong demand in sectors like healthcare, manufacturing, and utilities. The company has developed strong relationships with Oracle and is seeing good momentum, although the Stargate JV has not yet shown direct impact.
Q: What are the expectations for margins in FY26, and will the target range of 17-19% be maintained?
A: The CEO confirmed that the target range of 17-19% for EBITDA margins remains unchanged. The company is making fundamental corrections and driving operational efficiency to achieve this target by the end of FY26.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
