TCS re­ports 8.4% jump in Q2 profit, beats street es­ti­mates

Dig­i­tal rev­enue up 5.9%; de­clares a div­i­dend of R 7 per share

Financial Chronicle - - FRONT PAGE -

BEAT­ING street ex­pec­ta­tions, TCS has re­ported an 8.4 per cent se­quen­tial in­crease in con­sol­i­dated profit at Rs 6,446 crore for the July-Septem­ber quar­ter of this fi­nan­cial year (FY18), backed by strong vol­ume growth and im­proved op­er­a­tional per­for­mance.

Con­sol­i­dated rev­enue grew by 3.2 per cent to Rs 30,541 crore. Rev­enue growth in dol­lar terms was also up by 3.2 per cent at $4,739 mil­lion, while con­stant cur­rency rev­enue growth was 1.7 per cent, driven mainly by dig­i­tal ser­vice ver­ti­cal.

TCS CEO & MD Ra­jesh Gopinathan said: “We ex­pe­ri­enced ro­bust vol­ume growth in Q2, driven by good de­mand across mul­ti­ple in­dus­try ver­ti­cals. Strong, broad­based client met­rics this quar­ter demon­strates our in­creas­ing suc­cess with newer cus­tomers. Large deal wins this quar­ter, a good pipe­line, and bot­tom­ing out of the re­tail sec­tor soft­ness po­si­tions us well.”

Dig­i­tal rev­enue, which con­trib­uted 19.7 per cent to to­tal rev­enue, saw growth of 5.9 per cent in con­stant cur­rency in the sec­ond quar­ter.

TCS, the crown jewel of $104 bil­lion Tata Group, de­clared a div­i­dend of Rs 7 per share and set Oc­to­ber 26 as the record date.

The TCS stock gained 1.92 per cent to close at Rs 2,548.55 on BSE on Thurs­day. The re­sults were un­veiled after the mar­ket hours.

An­a­lysts at Emkay Global said the num­bers are ahead of its es­ti­mates and wel­comed the surge in the mar­gins. Ac­cord­ing to Reuters, an­a­lysts’ av­er­age es­ti­mate was Rs 6,306 crore.

Op­er­at­ing profit mar­gin came in at 25.1 per cent, an ex­pan­sion of 170 ba­sis points on se­quen­tial ba­sis, but it was short of the guid­ance range of 26-28 per cent.

The com­pany said it has added 1 client in $100 mil­lion cat­e­gory; 6 clients each in $50 mil­lion, $20 mil­lion and $10 mil­lion bands; and 28 clients in $1 mil­lion cat­e­gory.

“We con­tinue to gain share in the fast grow­ing dig­i­tal spend of our cus­tomers, ev­i­dent in our in­dus­try-lead­ing dig­i­tal growth in Q2. By sharp­en­ing our fo­cus on in­di­vid­ual com­po­nents of the dig­i­tal ser­vice stack, we have been able to bring to bear the full power of our con­tex­tual knowl­edge, re­search and in­no­va­tion, and in­vest­ments in lo­ca­tion-in­de­pen­dent ag­ile, au­to­ma­tion and cloud on our cus­tomers’ trans­for­ma­tional im­per­a­tives and be­come a trusted part­ner in their Busi­ness 4.0 jour­neys,” Gopinathan said.

TCS is the first among In­dia’s soft­ware ser­vices ex­porters to re­port earn­ings for July-Septem­ber. Smaller ri­val Wipro is sched­uled to re­port next week.

The soft­ware ma­jor wit­nessed strong rev­enue growth across ver­ti­cals. With the ex­cep­tion of re­tail and CMI, all in­dus­try ver­ti­cals grew above the com­pany av­er­age, led by travel & hos­pi­tal­ity (up 8 per cent, en­ergy & util­i­ties up 7.2 per cent) and life sciences & health­care rose 3.6 per cent. BFSI ac­counts for more than 30 per cent of TCS rev­enues, while re­tail makes up about 13 per cent.

“In re­tail we are see­ing a sig­nif­i­cant amount of trac­tion. I think we should see a turn­around in re­tail in the next few quar­ters it­self,” Gopinathan said. “Di­rec­tion­ally it [BFSI] is pos­i­tive but dif­fi­cult to say when the turn­around in BFSI is likely to hap­pen,” he added

Growth was mainly led by Europe (up 5.3 per cent), Latin Amer­ica (up 5.7 per cent), APAC (up 3 per cent) and UK (up 2.5 per cent). North Amer­ica grew by 1.4 per cent with con­tin­ued soft­ness in bank­ing and re­tail.

“Rigour and dis­ci­pline in our op­er­a­tions helped ac­com­plish an im­pres­sive mar­gin per­for­mance and progress along the prof­itabil­ity path we had out­lined ear­lier. Our in­vest­ment pro­gram re­mains geared for growth. Con­tin­ued in­vest­ments in dig­i­tal de­sign and trans­for­ma­tional ca­pa­bil­i­ties are pay­ing off, and it shows in the strong growth in our Dig­i­tal busi­ness,” V Ramakrishnan, chief fi­nan­cial of­fi­cer, said.

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