Tech giant soars 30 per cent despite an earnings slump

The Indian Silicon Valley has been grappling with cross-Atlantic headwinds for nearly a year now. High-interest rates and rising inflation have forced major sectors in the US to cut their spending, and most Indian IT players are feeling the heat. But Tech Mahindra , India's sixth-largest IT company by market cap, might just have taken the hardest hit. In the nine months ending December 2023, its operating profit declined by a whopping 55 per cent YoY. In fact, its profit after tax (PAT) has declined for four consecutive quarters, and its operating profit margin has shrunk to its lowest level in 10 years. Forgettable nine months The profits have shrunk significantly over the last year 9M FY23 9M FY24 YoY change (%) Revenue (Rs cr) 39124 39572 -1.1 Operating profit (Rs cr) 2052 4517 -54.6 Operating profit margin (%) 5.2 11.4 PAT (Rs cr) 1729 3756 -54 Surprisingly, however, the market remains euphoric about the stock. Its share price has grown nearly 30 per cent in the past 12 months (as of February 2, 2024). The glaring disparity between share price and financial performance poses several questions. Does the hive mind of the market know something individual investors don't? Also, why is Tech Mahindra the worst hit by these industry-wide headwinds? We may not have a concrete answer for th