TCS on course for doubledigit growth this financial year
Firm reports its fastest sequential growth in revenue in more than 3 years; net profit rises 3.4% to $1.1 bn in Sept quarter
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.
TCS’ chief executive Rajesh Gopinathan also 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, TCS’ 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 September 30 compared with the preceding three months.
“On y/y basis the growth improved to 11.5% in organic cc 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 for 2Q”.
Net profit rose 3.4% to $1.1 billion in the September quarter 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 the weakening of the rupee.
A survey of 23 analysts had estimated ₹7,925.4 crore ($1.07 billion) profit 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’ 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.
Mumbai-based TCS’ impressive performance in the July-september period came on the back
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of a strong 4.1% constant currency growth in the first quarter. Encouragingly for its investors, September quarter was the third-straight double-digit increase in revenue for TCS. The company posted a 11.7% y-o-y dollar revenue growth in the January-march period, followed by a 10% y-o-y growth in both April-june and July-september quarters.
For the first time in three years, India’s largest software services provider is poised to outpace Nasscom’s industry growth projection of 7-9% in constant currency terms.
The US, which accounted for 51.1% of TCS’S September quarter revenue, and financial services, which constituted 31.2% of overall business, grew 8.1% and 6.1%, y-o-y, respectively.