Tata Consultancy Services Ltd (TCS), India’s largest IT services firm by revenue, on Thursday reported single-digit revenue growth in the quarter ended 30 September, after four successive quarters of double digit growth, mainly on account of volatility in the financial services sector.
Revenue growth in constant currency terms was recorded at 8.4% year-on-year. The company posted a revenue of ₹38,977 crore and a profit of ₹8,042 crore, up 1.8% year on year (y-o-y).
Both the revenue and profit figures were below analyst estimates. According to Bloomberg estimates, analysts expected TCS to achieve a revenue of ₹39,435.20 crore and a profit of ₹8,299.2 crore.
Mint reported on 10 October that while the July-September quarter has historically been the strongest for Indian IT services companies, in this fiscal year, there is unlikely to be any show of strength when companies announce their second quarter results. Indian tech companies have been cautious on tech spending in the banking and financial services vertical because of weakness in capital markets and in European banks.
“Growth was definitely lower than what we originally thought because of volatility in the BFSI and retail sectors," said chief executive officer (CEO) Rajesh Gopinathan, at a press conference in Mumbai on Thursday. “However we are still seeing strong deal flow, particularly with opportunities in emerging markets," he said.
Revenue growth for the IT services firm was led by Europe and the UK, which grew 16% and 13.3% respectively in the quarter, followed by North America and the Asia Pacific, which grew 5.3% and 6.5% respectively.
“We have been gearing up for growth despite the volatility. Our margins in Q2 reflect our continued investments in our people and in building the capacity we need to fulfil our strong order book," said V. Ramakrishnan, chief financial officer, TCS.
From an industry segment perspective, growth in Q2 was led by Life Sciences (16%) and Communications and Media (11.8%). Growth was also driven by digital revenue, which accounted for 33.2% of total of total revenue, growing 27.9% year-on-year.
The CEO said the company hopes to return to double-digit growth next quarter, but the second half of the year generally tends to be weaker for IT firms, given that there are more holidays in that period.
“We remain confident as the medium and longer term demand for our services continues to be very strong, as evidenced by our Q2 order book - the highest in the last six quarters" said Gopinathan.
Some of the key contracts the company acquired in Q2 included a strategic partnership with General Motors for future global vehicle design and development. TCS also won work from airline operator Lufthansa and Reserve Bank of India in Q2.
TCS said it witnessed a net addition of 14,097 employees in the September quarter, the highest ever number on-boarded in a quarter.