Tata Technologies posted a steep fall in profit for the October–December quarter, mainly due to a one-time cost linked to India’s new labour laws, reported Reuters. The company, however, said it expects a strong recovery in the coming quarter.
posted a 96% drop in net profit for the third quarter. Consolidated net profit fell to Rs 66.4 million from Rs 1.69 billion a year earlier. This marks the company’s sharpest profit decline since its stock market listing in 2023.
The main reason was a one-time exceptional charge of Rs 1.4 billion. The cost arose after India notified new labour codes, which increased Tata Technologies’ liabilities related to gratuity and employee leave.
The new labour rules, which came into effect in November, require employee wages to make up at least 50% of the total cost to company. Benefits such as provident fund and gratuity must now be calculated based on wages, raising costs for employers.
Several IT and engineering firms, including TCS, HCLTech and Tata Elxsi, have earlier reported similar one-time charges after factoring in the new rules.
Despite the weak quarter, Tata Technologies’ management remains optimistic. Chief Executive Officer Warren Harris said the company is “poised for a sharp acceleration in Q4,” with revenue expected to grow by more than 10% sequentially.
Chief Financial Officer Uttam Gujrati added that margin pressure seen in the third quarter is now behind the company. He said the firm expects margins to return to, and even exceed, second-quarter levels.
Overall revenue for the quarter rose 3.7% to Rs 13.66 billion. Revenue from the services segment, which accounts for 77% of total income, grew 4.7%. Revenue from technology solutions remained flat.
The Tata Group company counts Jaguar Land Rover and Tata Motors among its key clients and had earlier warned of short-term challenges and margin pressure in the third quarter due to temporary headwinds and salary hikes.