Indian IT firm Tech Mahindra's shares jump most in 8 years on turnaround plan

BENGALURU (Reuters) - Tech Mahindra shares jumped 13.2% on Friday, their biggest intraday gain in nearly eight years, after India's No.5 IT company announced a turnaround plan that offered succour following declining revenue growth for the past three quarters.

The stock was up 8.6% at 1,292.25 rupees as of 11.48 a.m. IST, leading gains on the Nifty IT index, which was up 1.8%.

Including the day's move, Tech Mahindra is up 2% so far this year compared with a 4% fall in the IT index. Larger rival Infosys was down 6.8%, while Tata Consultancy Services was up 2.2%.

The Pune-based Tech Mahindra laid out a three-year plan on Thursday, aimed at increasing revenue and doubling operating margin to 15% by fiscal 2027. The company reported a fall in revenue between 2% to 6.2% in rupee terms in the last three quarters, including the March quarter.

Brokerages welcomed the company's turnaround plan, with HSBC writing, "The new transformation plan looks quite sensible - acknowledging the need (for) investment in sales and to manage costs to expand margins. However, we believe the path to this turnaround is going to be challenging, at best."

However, execution remained a concern. "While management's plan is comprehensive, its execution amidst a weak demand environment carries risk," Jefferies said.

Market leader Tata Consultancy Services missed revenue estimates, although it said a strong deal pipeline will drive growth this fiscal year.

At least 13 analysts cut their target price for Tech Mahindra, while two raised after the results, with the median price target falling to 1,289.50 rupees from 1,320.50 rupees in March, as per LSEG estimates.

(Reporting by Sai Ishwarbharath B; Editing by Janane Venkatraman)