Home >Companies >Company Results >TCS reports 28.5% jump  in  Q1  net  profit

BENGALURU : Tata Consultancy Services Ltd (TCS) reported a 28.5% increase in fiscal first-quarter profit amid strong demand from financial services, retail and healthcare clients in the US and UK.

Profit rose to 9,008 crore in the three months ended 30 June from 7,008 crore a year earlier, the company said. Earnings, however, missed the consensus estimate of 9,382.5 crore in a Bloomberg survey.

June quarter revenue grew 16.4% in constant-currency terms to 45,411 crore from 38,322 crore a year ago, slightly below the consensus estimate of 45,748.6 crore. However, weakness in some regional markets, including India, impacted sales growth.

“We believe the impact on India revenues will be reverted in the coming quarters. Hence, we expect improving revenue trajectory and expect the company to achieve double-digit revenue growth in FY22," ICICI Securities said in a post-earnings note.

The pandemic has accelerated the adoption of digital technologies by firms, driving demand for software services companies such as TCS. Infosys Ltd is expected to report earnings on 14 July.

Dollar revenue for the quarter grew 21.6% from a year ago to $6.15 billion, helped by new orders worth $8.1 billion from banking, financial services and insurance (BFSI) and retail clients. “Our business in North America, BFSI, and retail all showed appreciable growth, which underlines the resilience of our operating model, the relevance of our offerings and, above all, the passion and dedication of our associates. Given the variants of the virus and fears of a potential third wave, we are watchful of the emerging situation and remain optimistic of opportunities in our core markets and verticals," said Rajesh Gopinathan, chief executive officer and managing director, TCS.

“The deal pipeline is strong, and the nature of deals is distributed across large and smaller deals, which is a healthy sign," he added.

TCS’s operating margin narrowed to 25.5% in the June quarter from 26.8% in the preceding three months due to the impact of wage hikes and an increase in hiring. “Overall, we will be able to sustain our margins to our aspirational levels," said Samir Seksaria, chief financial officer, TCS.

Growth was led by the life sciences and healthcare vertical, which grew 7.3% sequentially in constant currency. The financial services sector, the largest vertical for TCS contributing about 30% to total revenue, grew 3.1% sequentially, while retail and consumer packaged goods, the second-largest, bounced back with a sequential 4.4% increase in constant-currency terms.

“TCS has a solid foundation for growth. It is reorganizing itself and changing its operating model to align with the requirements in the market. It has managed to control attrition and provided stability, which is a good indicator for a stable organization," said D.D. Mishra, senior research director, Gartner.

On a trailing 12-month basis, the attrition rate stood at 8.6% in the June quarter, up from an all-time low of 7.2% in the March quarter, indicating strong demand in the industry. The company recorded a quarterly net addition of 20,409 employees in the three months ended 30 June, taking the total headcount to 509,058.

Ahead of the earnings, shares of TCS fell 0.56% to close at 3,257.10 on the BSE.

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