TCS Q2 profit falls 2.1%
Increase in costs, sluggishness in BFSI and retail businesses affect performance
India’s largest software services exporter, TCS, reported a 2.1 per cent decline in its second-quarter profit to ₹6,446 crore from ₹6,586 crore in the same period last year due to higher costs and sluggishness in the BFSI and retail businesses.
Revenue rose 4.3 per cent to ₹30,541 crore from ₹29,284 crore last year.
Digital revenues continued to increase and accounted for 19.7 per cent of TCS’ overall revenues for the quarter. On a year-on-year basis, digital revenues grew 31 per cent, the company said.
“We continue to gain share in the fast-growing digital spend of our customers, evident in our industry-leading digital growth in Q2,” said Rajesh Gopinathan, CEO and MD.
Gopinath said that while the size of digital deals still continues to be quite small, the company is getting into certain larger digital transformation deals. “We are close to announcing a $50 million kind of deal in the IoT space. We are getting into deals that are substantial,” he said.
Margins, at 25.1 per cent, are still below the company’s stated target band of 26-28 per cent. In the same quarter last year, margins stood at 26 per cent.
Revenue from North America, which makes up 54 per cent of the total, increased 3.6 per cent year-on-year in constant currency terms.
With the exception of BFSI and retail, all industries grew above 9.5 per cent in the quarter versus the same quarter last year. North America grew 1.4 per cent Q-o-Q with continued softness in banking and retail, the company said.
Gopinath played down the sluggishness in retail and the banking, financial services and insurance (BFSI) sectors saying that there is overall optimism and a turnaround in at least the retail sector is expected in the next couple of quarters.
He said the fear of fintech has finally passed and that banks are looking to increase spends on IT, which could mean increased revenue for TCS.
TCS added one new client in the $100 million plus band, while six clients each were added in the $50 million, $20 million and $10 million bands.
During the quarter, TCS saw its attrition rate come down 0.3 per cent sequentially to 11.3 per cent. It added 15,868 employees (gross) and 3,404 (net) in the September 2017 quarter, taking the total headcount to 389,213 people. The company recruited 3,725 employees outside India, bringing the total to 6,979 in the first half of the fiscal year. Also read