TCS beats Street estimates on faster demand recovery

Announces ~16,000 crore share buyback plan

Tata Consultancy Services (TCS), the country ’s largest IT services company, on Wednesday beat street expectations in its second-quarter (Q2) financials, led by a rebound in growth in key verticals and geographies.

The company’s consolidated revenues in Q2 rose 3 per cent on a year-on-year (y-o-y) basis at ~40,135 crore while they were higher 4.7 per cent quarter-on-quarter (q-o-q).

In dollar terms, revenues stood at $5.42 billion, an increase of 7.2 per cent over the same period of the last financial year.

The board of directors approved a share buyback, the third one of the Mumbai-headquartered company in the past four years.

The buyback, worth ~16,000 crore, is 1.42 per cent of its paid-up capital. In 2018, it bought back 76.1 million equity shares, worth ~16,000 crore. That constituted 1.99 per cent of its paid-up equity capital then.

In the quarter-ended June, TCS reported profit before tax (PBT) of ~10,037 crore, which was 5.6 per cent higher than in the previous quarter and 4.7 per cent lower than the same period last year. Net income rose 20.3 per cent yo-y at ~8,433 crore while sequentially it rose 4.9 per cent. This figure excluded the ~1,218 crore on the legal claim in the

Epic Systems theft case.

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IT IS A VERY STRONG QUARTER FROM FINANCIAL PERSPECTIVE…IT SETS US UP IN PARTICIPATING IN TECH TRANSFORMATION IN THE MEDIUM TO LONG TERM” RAJESH GOPINATHAN, CEO & MD

“It (Q2) has been a very strong quarter from a financial perspective. It also underlines demand recovery and it sets us up in participating in technology transformation in the medium to long term,” said Rajesh Gopinathan, CEO and MD. “If you see the revenue performance in dollar terms, it is our best performance in more than 20 quarters.”

The company called the recovery happening in the second quarter a “pleasant surprise”. TCS had earlier predicted reaching preCovid levels of ~40,000 crore in revenues in the December quarter.

However, Gopinathan sounded cautious when he said the overall business environment was not “out of the woods” because Covid19 was there.

Growth in Q2 was led by two key verticals – retail; and banking, financial services and insurance (BFSI) – which account for more than 50 per cent of its revenues. The company declared an interim dividend of ~12 per share. The record date has been fixed on October 15.