Software behemoth Tata Consultancy Services’ (TCS) reported net profit ₹8093 crore in the fourth quarter ending in March down from 0.8% sequentially from ₹8118 crore in Q3 missing analyst estimates. The management noted that impact due to COvid-19 lockdowns were limited to last two weeks of March.
Revenue missed analyst estimates at ₹39,946 crore up 5.1% YoY largely hit by supply side challenges. For the year ended March 2020 the company reported annual revenue of ₹156,949 Crore up 7.2% YoY and 7.1% in constant currency. Net margin was reported at 20.6%. Operating margin for the full year stood at 24.6%.
As per analyst estimates TCS was expected to report revenue of ₹40317.3 crore and net profit of ₹8159 crore factoring in weakness from March operations globally due to the Covid-19 pandemic.
Rajesh Gopinathan, Chief Executive Officer and Managing Director said, “We went from a seamless integrated operational to a dispersed work model in a very short period of time and that had it's challenges but it tested our business models. Our long-term profitability model is not shaken by this event and we expect to be back on track to Q3 FY20 level performance by Q3 FY21." He noted that going forward demand impact will hurt revenue in Q1 FY21 following the global economic hit due a crisis comparable to the global finacial crisis of 2008.
Operating margin for the Q4 stood at 25.1% mitigated by currency support noted the management, and net margin reported was 20.2%. V Ramakrishnan, Chief Financial Officer noted that in the environment where demand seemed difficult to predict, the company will seek to optimise costs across all areas.
Dollar revenue for the quarter stood at $5,444 million, down 2.5 % QoQ. Constant currency revenue growth at 3 % was much lower compared to 6.8 % in December quarter and 12.7 % in Q4 FY19.
In Q4, TCS reported their strongest ever quarterly order book at $8.9 billion worth of total contract value of which $5.3 billion worth of deals came from North America. Gopinathan added, organizations across the world are realizing the need for operational and systems resilience leading to strong deal wins.
On a YoY basis, North America grew slowest at 4.3% at constant currency levels. On a sequential level, In terms of top markets, growth was led by Europe (+11.9%) and UK (+5.4), Latin America grew +3.9%, Asia Pacific grew 3.5% and Middle east and Asia grew 1.3%. North America grew +0.2% while India declined by 1.9%. A lot of opportunities came from cloud migration initiated by customers during this time.
During the quarter revenue growth was led by life sciences & healthcare (+16.2%), communications & media (+9.3%) and manufacturing (+7%). Retail & CPG grew 4.2% and technology & Services grew +3.5%. BFSJ revenue declined 1.3%. BFSI revenue declined by 1.3% largely due to supply side glitches following regulatory concerns in enabling remote work timely.
The company reported headcount of 448,464 up by 1788 during the quarter. While still maintaining industry lowest attrition levels, the company reported a stable attrition rate of 12.1%. “ There will be no retranchment of the workforce and we will honour all the offers made during the year including the 40,000 odd freshers," noted Milind Lakkad, EVP and Global head of HR, TCS. He added that promotions will continue subject to business performance but no increments will be given this time. However, there is a complete freeze on lateral hiring beyond the offers already made. The accelerated onboarding of almost 30,000 employees seen in H1 FY20 is not likely to happen this year.
Ahead of its earnings announcement, TCS shares were down 1.09% to close at ₹1715.60 on the BSE. The board recommended a final dividend of ₹6 per share.