TCS net profit falls 13% in Q1

Execution delays, WFH trim revenue

The first quarter earnings season has begun on a sore note, with Tata Consultancy Services, the country’s largest software firm, on Thursday reporting a worse-than-expected quarterly profit decline, as pandemic-induced lockdown hit the company’s operations.

Net profit of the Mumbai-based company fell 13 per cent sequentially to Rs 7,049 crore in the April-June period, as delays in project executions and a shift to working from home took its toll on revenue and margins.

“The revenue impact of the pandemic played out broadly along the lines we had anticipated at the start of the quarter,” chief executive officer Rajesh Gopinathan said.

“It affected all verticals, with the exception of life sciences and healthcare, with varying levels of impact. We believe it has bottomed out, and we should now start tracing our path to growth,” he added.

Revenue rose marginally in the first quarter of the fiscal to Rs 38,322 crore as against Rs 38,172 crore in the year-ago period.

While Indian IT firms had seen some Covid-19 impact in March, this is the first full quarter factoring in the impact of lockdowns across the globe.

After an initial period of disruption, customers

Rajesh Gopinathan

have now stabilised their operations, and the company is seeing many customers focus on front-end transformation, resulting in significant traction for its products and services, Gopinathan said.

“The other big investment themes are around driving operational resilience, adaptability and optimisation. We signed several large core transformation programs encompassing operations, applications, cloud and cyber security,” he said.

The company said despite the continued uncertainty and weakness in all major economies, it has had very healthy deal closures and a strong pipeline.

At the beginning of the first quarter, TCS had said it expects recovery from the third quarter of FY21.

After an initial period of disruption, customers have now stabilised their operations and are now embarking on new beginnings to adapt and thrive in a post-pandemic world.

“Very encouragingly, we saw customers launch new business transformation programs or restart deferred programs during the quarter. This is indicative of business confidence returning in pockets," he added.

The company’s board of directors have declared an interim dividend of Rs 5 per equity share of Rs 1 each of the company.

N. Ganapathy Subramaniam, chief operating officer and executive director of TCS, said: "Despite the continued uncertainty and weakness in all major economies, we have had very healthy deal closures and a strong pipeline. We will stay focused on helping our customers overcome the current challenges and prepare for the growth ahead."

The company said the demand contraction was broad-based by geography. Other than Europe and Latin America, which saw growth rise by 2.7 per cent and 0.2 per cent respectively, all other markets saw a decline: North America (-6.1 per cent), UK (-8.5 per cent), India (-27.6 per cent), Asia Pacific (-3.2 per cent) and MEA (-11.7 per cent).

The company said its consolidated headcount stood at 4,43,676 as of June 30, compared to 4,48,464 as of March 31.

Shares of TCS ended 0.60 per cent lower at Rs 2,204 on the BSE.