TCS on course for double-digit growth this financial year
MUMBAI:Tata Consultancy Services Ltd (TCS) kicked off the fiscal second-quarter earnings season by reporting its fastest sequential growth in revenue in more than three years.
Chief executive Rajesh Gopinathan exuded optimism that, save for any macroeconomic downside risk, the company will clock double-digit growth in revenue this financial year.
“We have the numbers before us. I can say that we will have a double-digit growth this year,” said Gopinathan, who took over as CEO in February last year.
In constant currency terms, the company’s September quarter revenue rose 3.7% from the preceding three months. It grew 11.5% from a year earlier. Currency fluctuations, however, took some sheen off the company’s growth as dollar revenue grew at a slower 3.2% to $5.21 billion in the quarter ended 30 September compared with the preceding three months.
“On year-on-year basis, the growth improved to 11.5% in organic constant currency terms. This is the highest growth in 12 quarters,” HSBC analyst Yogesh Aggarwal said in a note to clients. “TCS’ 2Q is largely in line with our expectations”. Net profit rose 3.4% to $1.1 billion from $1.08 billion in the preceding three months, while operating margin jumped 150 basis points to 26.5% from 25% in the April-June period, aided largely by a weaker rupee.
A Bloomberg survey of 23 analysts had estimated a profit of ₹7,925.4 crore ($1.07 billion) on net sales of ₹36,470.4 crore ($4.92 billion). TCS continued to bag large deals as it won $4.9 billion worth of deals in the September quarter. In the first quarter, the company won contracts worth $4.9 billion.
Clients spending more on TCS’s digital technology solution offerings helped increase its share of digital business, which surged 60% year-on-year and accounted for $1.47 billion of total revenue in the September quarter.
The firm’s impressive performance in the July-September period came on the back of a strong 4.1% constant currency revenue growth in the first quarter. Encouragingly for its investors, September quarter was the third-straight double-digit increase in revenue for TCS. The firm posted a 11.7% y-o-y dollar revenue growth in the JanuaryMarch period, followed by a 10% y-o-y growth in both April-June and July-September quarters.