TCS Q1 profit beats estimates, rises to Rs 6,320 cr amid cloud, mobile push
A flurry of startups and increased capital investment in technology companies have seen a wider acceptance for digital businesses, which have helped companies like TCS.business Updated: Jul 15, 2016 08:56 IST
India’s largest software services exporter, Tata Consultancy Services (TCS), on Thursday beat analyst estimates with a 9.4% rise in net profit during the first quarter, after new cloud computing and mobile services helped shore up revenue. The company reported overall growth across regions and verticals and also won more outsourcing deals from Western clients.
TCS’ net profit stood at Rs 6,347 crore in April-June, compared to Rs 5,773 crore a year ago. Analysts had expected the company to post a net profit of Rs 6,060 crore during the quarter.
Revenue rose 14.1% year-on-year to Rs 29,305 crore during the quarter.
Operating margins, a real indicator of the company’s performance, stood at 25.1% in April-June.
“It has been a strong quarter from multiple dimensions,” CEO N Chandrasekaran said at a conference after the results announcement. “All markets are growing. Sectors, including travel, utilities, energy and life sciences, are seeing exceptional growth driven by increased adoption to digital and cloud.
The performance came despite headwinds in the form of wage hikes and currency fluctuations, he added.
A flurry of startups and increased capital investment in technology companies have seen a wider acceptance for digital businesses, which have helped companies like TCS. “We are seeing a big adoption of digital across the board. Also seeing a lot of traction in analytics and in the Internet of Things. Hopefully with the increase in digital and automation, we can push for increase in pricing,” Chandrasekaran added.
Digital accounted for 16% of the company’s total revenue during the quarter.
Software companies have been the mainstay of Indian exports, since the industry is one of the biggest contributors to the export basket. But the UK’s decision to exit the European Union has raised fears as Europe is the second-largest market for the industry, accounting for a third of the total exports from India; of this the UK has a 17% share. “Need to watch how Brexit plays out, how companies, particularly financial firms react. Based on interactions with customers post June 23, we have no caution to report. Things are developing as we speak,” Chandrasekaran said.
During the first quarter, the company posted incremental revenues of $155 million – the highest in the last seven quarters- driven by strong growth across core markets in North America, the UK and Europe. India was the highlight among growth markets.
Retaining employees has also been positive. “The company has seen attrition rate fall for the third consecutive quarter to 13.6%. There has been a 200 basis point impact from wage hikes on margins,” CFO Rajesh Gopinathan said.
TCS shares ended up 1.2% to Rs 2,520.30 on the BSE on Thursday. The results were announced after markets hours.
TCS is the first of the major Indian IT companies to report earnings, with Infosys results due on Friday.