How TCS managed to achieve double-digit growth in March quarter
TCS’s $2.25 billion deal renewal from Nielsen, which now translates into more business every year for the company than in the past, also helped it better its growth
Bengaluru: A higher client spend from companies in Europe, and higher growth from the company’s four industry segments, including from custom ers in the oil and gas industry, helped Tata Consultancy Services Ltd (TCS) report a double-digit year-over-year growth in the January-March period, after 13 straight quarters of underperformance.
Expectedly, the company’s chief executive officer Rajesh Gopinathan called it a “turnaround” performance.
TCS does not give quarterly or annual forecasts but the management reaffirmed its optimism (first outlined in January) of the company clocking double-digit growth in the current financial year.
“It has been an extremely satisfying last 15 months and there is no doubt about it,” TCS’s chief operating officer N. Ganapathy Subramaniam said in an interview last week.
In February last year, TCS appointed Subramaniam as chief operating officer and Rajesh Gopinathan as chief executive officer.
Gopinathan took over from N. Chandrasekaran, who was appointed chairman of Tata Sons Ltd, the Tata group holding company
So what explains this higher growth for TCS, which added $1.51 billion in incremental revenue to end with $19.1 billion in revenue in 2017-18, an 8.6% dollar revenue growth (6.7% in constant currency terms)?
To start with, higher client spending in Europe, which accounted for 27.7% or $5.29 billion of the company’s overall revenue, a growth of 18.4% year-on-year in the year ended 31 March 2018.
This growth was primarily led by large deal wins, including a $690 million, 10-year contract from a unit of British insurer Prudential, Lloyds Banking Group, Rolls Royce Group and Marks and Spencer.
TCS discloses its performance in Europe under Continental Europe and the UK.
Continental Europe, which accounted for 13.4% of total revenue, reported a 26.5% year-on-year jump, while the UK, which brought in the remaining 14.3% of business from Europe, reported an 11.73% increase.
TCS’s four industry verticals, including oil and gas, healthcare and life sciences, communication and media and travel and hospitality, reported double-digit growth, thereby helping the company end the year on a strong footing.
TCS’s $2.25 billion deal renewal from television ratings measurement company Nielsen, which now translates into more business every year for the company than in the past, also helped it better its growth.
This is reflected in the 14.8% growth in the company’s communication and media industry vertical, which accounted for 7.4% or $1.412 billion of its overall revenue.
“What we have accomplished is that we have added this capability of adding a cylinder to a moving car. Now how we understand is that Digital is not technology. It is a series of technologies. This is why we have defined Business 4.0 under which we can come up with new offerings, without say destabilising a car. And credit to Rajesh (Gopinathan) and our team for remaining focused on delivering what our clients want,” said Subramaniam.
TCS claims that Digital, the fuzzy umbrella term which each company uses to classify revenue generated from areas generally classified as social, mobile, analytics, cloud computing and Internet of Things, grew 43% in constant currency terms to $4.5 billion or about 24% of company’s overall revenue.