TCS posts 28.5% rise in Q1 profit at Rs 9,008 cr

Tata Consultancy Services (TCS) kick-started earnings season for India Inc with a mixed set of numbers for the first quarter of the current financial year as Indian businesses got disrupted due to the deadly second wave of the Covid-19 pandemic.
The company reported dollar revenue growth in line with estimates, though its operating margin fell on a sequential basis. The Mumbai-headquartered firm reported another quarter of sound TCV (total contract value) of $8.1 billion during the April-June period.

During the quarter, TCS posted a 28.5% rise in its net profit at Rs 9,008 crore for the quarter ended June 2021 as compared to the same period of last fiscal. Its revenues grew 18.5% to Rs 45,411 crore compared to the year-ago quarter.

In dollar terms, the firm’s revenues were at $6.15 billion, a growth of 2.4% in constant currency term sequentially and 16.4% on a year-on-year basis.

“First quarter was a balance between health crisis and business opportunities. While core markets like the US and UK grew, our Indian business was impacted due to the second wave of Covid. However, we have seen growth revival in Indian business from the end of June onwards but remain vigilant about the situation,” said Rajesh Gopinathan, Chief Executive Officer and Managing Director of TCS (In picture).

He, however, remained optimistic about the double-digit revenue growth prospects of the company during this financial year. “Despite the one-off seen in the Indian market, our strong deal pipeline and good growth in core markets gave us the confidence that we are on track for the double-digit revenue growth,” Gopinathan said.

The company declared an interim dividend of Rs 7 per share on Thursday.

The company’s operating margins fell by 130 basis points at 25.5% over the last quarter, though it was 190 bps higher than the same period last fiscal.

“Despite the wage hikes and promotions, our operating margin remained healthy, which we hope to maintain in this fiscal year. Overall, we will be able to maintain our aspirational margin band,” said Samir Seksaria, Chief Financial Officer at TCS.

During the first quarter, while the North American market grew by 4.1% quarter-on-quarter, the UK market witnessed a growth of 3.6% in constant currency terms. However, the Indian market saw a degrowth of 14.1% during this period, dragging the growth numbers for this period.

“Indian market saw degrowth with our iON and public sector businesses getting affected due to the pandemic. Though we have seen revival from June end, we remain watchful about the situation,” said Gopinathan.Among the verticals, BFSI (banking, financial services, and insurance) came back strongly with 3.1% growth in constant currency term (QoQ), while the life sciences vertical grew 7.3%.During the quarter, the company’s employee headcount crossed the 500,000-mark with a final headcount of 509,058 employees as of June 30. The quarter saw a net addition of 20,409, which is its highest quarterly net addition ever. On the attrition side, the IT services attrition rate (LTM) was at 8.6%.