Jan 16 (Reuters) - Engineering research and development (ER&D) firm Tata Technologies reported a 96% drop in third-quarter profit on Thursday, hurt primarily by a one-time charge tied to India's new labour codes, their largest such drop since the company's 2023 market debut.
Going forward, the firm is still "poised for a sharp acceleration in Q4," CEO Warren Harris said in a statement, expecting more than 10% sequential revenue growth.
The Tata group company, which counts Jaguar Land Rover and Tata Motors among its largest clients, said consolidated net profit fell to 66.4 million rupees ($731,036) in the October-December period from 1.69 billion rupees a year earlier.
Tata Technologies booked a one-time exceptional charge of 1.4 billion rupees in the quarter after India notified new labour codes, which raised its gratuity and leave-related liabilities.
The codes, which came into effect in November, require employee wages to be at least 50% of cost to company, and benefits like provident fund and gratuity to be determined based on wages.
Previously, companies like TCS and HCLTech have reported similar one-time charges to factor in the new labour codes, while peer ER&D firm Tata Elxsi's profit was hit by it.
Tata Technologies had said in October it expected short-term tactical challenges and margin pressure in the third quarter, due to "near-term temporary headwinds" and salary hikes.
"Margin headwinds from Q3 are behind us, and we expect to return to--and exceed--the Q2 adjusted margin run-rate," CFO Uttam Gujrati said.
Revenue from its services segment, making up 77% of overall revenue, rose 4.7%, while technology solutions revenue remained flat.
The company's overall revenue rose 3.7% to 13.66 billion rupees.
($1 = 90.8300 Indian rupees)
(Reporting by Aleef Jahan in Bengaluru; Editing by Ronojoy Mazumdar)
