TCS puts up best show in 14 quarters, declares 1:1 bonus

Shareholders to also get dividend of ₹29 per share, says board

Tata Consultancy Services Ltd (TCS) on Thursday posted a stellar set of fiscal fourth-quarter numbers that beat analysts’ estimates both on revenue and profitability.

Revenue grew 11.7% from a year ago following 13 straight quarters of relative underperformance, prompting the board of India’s largest software services company to offer shareholders one free share for each held as well as a dividend of ₹29 per share.

TCS generated $1.51 billion in additional revenue in 2017-18, about twice the $731 million in new business done by Infosys Ltd, the country’s second largest software services firm.

Although TCS’s profitability narrowed for the year ended March, the management, unlike that of smaller rival Infosys, expressed confidence in retaining its profitability at more than 25% for the current year.

The company’s dollar revenue increased 3.9% to $4.97 billion in the quarter ended March 31 from the preceding three months, because of higher client spending across its major markets and key industry verticals.

Net profit rose 5.7% to $1.07 billion in the March quarter from $1.01 billion in the preceding three months while operating margin widened 20 basis points to 25.4% from 25.2% in the January-March period.

A Bloomberg survey of 26 analysts had estimated TCS would report revenue of $4.85 billion, or ₹31,659.7 crore, in the quarter. Analysts expected the company to report a profit of $1.05 billion, or ₹6,810.3,7 crore, in the period.

“I’m very happy with the strong set of Q4 earnings for what is a turnaround year for TCS as we are back to doubledigit trajectory,” said Rajesh Gopinathan, chief executive officer, TCS.

TCS does not give quarterly or annual forecasts but a few equity analysts expect the company to report double-digit growth in the current year, primarily on account of winning large outsourcing contracts.

“Solid 4Q with a revenue beat and a slight miss on margins,” analysts Anantha Narayan and Nitin Jain of Credit Suisse wrote in a note to investors after TCS reported its earnings.

“The management is sounding incrementally more hopeful on financial services: In 4QY18, BFSI (financial services) remained muted with 0.4% QoQ growth (2.9% YoY) and so did North America with 0.2% QoQ (4.9% YoY)... Management thinks BFSI has likely bottomed out and hopes to see signs of recovery in 1QFY19.”

TCS ended fiscal year 2017-18 with $19.09 billion in revenue, up 8.6% from the previous year, and a 24.8% operating margin. Its profitability was still 90 basis points lower than the previous year’s 25.7%.

In constant currency terms, TCS reported a 6.7% growth, as against the 5.8% growth that Infosys managed.

Both figures were, however, lower than industry body Nasscom’s estimate of 7.8% growth last year.

TCS shares rose 0.99% to ₹3,190.65 on the BSE at the end of trading on a day the benchmark Sensex gained 0.28% to end at 34,427.29 points.

The results were reported after market hours.