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TCS beats Street with 9% profit rise, riding on cloud, digital push
MUMBAI: 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
MUMBAI: 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.
TCS’ net profit stood at ₹6,347 crore in April-June, compared to ₹5,773 crore a year ago. Analysts had expected the company to post a net profit of ₹6,060 crore during the quarter.
Revenue rose 14.1% year-on-year to ₹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. Our dollar terms growth of 3.7% is best in last six quarter,” CEO N Chandrasekaran said during 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 TCS’ revenue in 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. 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.
Attrition rate fell for the third consecutive quarter to 13.6%. TCS added 8,236 employees on a net basis and had 362,079 employees as of June-end.
“While analysts continue to speculate on the relative positioning of TCS to Cognizant and Infosys in the future, the current quarterly results reaffirm that they have directionally got their strategy right,” said Sanjoy Sen, doctoral research scholar, Aston Business School, UK.
