$1 billion Tech Mahindra wins landmark order

Rex Mathew
22 December 2006

The order is a further confirmation that Indian companies have the capability to win large outsourcing deals, which regularly went to global companies like IBM, Accenture and EDS till last year.

Till now, the single largest outsourcing deal by an Indian company was the $850-million deal by TCS with UK-based Pearl Group. HCL Technologies had earlier won a $200-million order from Skandia and a $330-million deal from DSG group. TCS, Infosys and Patni had won parts of a large outsourcing order from ABN Amro.

The 5-year order is from UK-based $36-billion telecom major British Telecom (BT) for providing internal IT support and managing BT''s managed services accounts with business customers. Tech Mahindra will support BT''s planned growth of managed services to business customers around the globe and continue to provide ongoing services related to BT''''s internal systems, processes and re-usable platforms. Tech Mahindra may hire up to 4,000 employees over the contract period to execute the order.

On the flip side, the order increases Tech Mahindra''s dependence on BT. The dependence was as high as 83 per cent of total revenues during the first quarter of 04-05, but was brought down to 64 per cent for the quarter ended 30 September, 2006.

This percentage would rise again in the coming quarters as the company starts work under the order. During the last reporting quarter, top-5 clients contributed 82 per cent of revenues while top-10 clients contributed 90 per cent of revenues.

Incidentally, BT was one of the co-promoters of Tech Mahindra, earlier known as Mahindra BT. As on 30 September, 2006, BT held a 32.55 per cent stake in the company, auto major Mahindra & Mahindra owned 46.41 per cent while a group company held 8.57 per cent.