1. TCS makes a comeback in Q2; net profit up 8.4% on-year, EBIT surprises at 25.1%

TCS makes a comeback in Q2; net profit up 8.4% on-year, EBIT surprises at 25.1%

Tata Consultancy Services (TCS), after posting disappointing financial results in Q1, reported its net profit at Rs 6,446 crore up by 8.4% QoQ in line with the street expectations.

By: | Updated: October 12, 2017 5:44 PM
TCS Chairman Natarajan Chandrasekaran (Image: Reuters)

Tata Consultancy Services (TCS), after posting disappointing financial results in Q1, reported its net profit at Rs 6,446 crore up by 8.4% QoQ in line with the street expectations. ET Now poll had predicted a profit of Rs 6,321 crore for TCS in the second quarter. CNBC-TV18 had forecast the profit at Rs 6,183 crore. TCS’ July-September revenue in rupee terms at Rs 30,641 crore again in line with the street expectations of 30,423. Brokerage IDBI had forecast TCS’ revenue to grow 3.2% at Rs 30,534 crore, while HDFC Securities had forecast a 3.5% to 3.6% growth QoQ.

TCS made a surprising comeback on the EBIT margin front by reporting 25.1% or the quarter that ended September 30, much higher than what was expected. It rose sharply from 23.4% in the previous quarter to 25.1%, inching towards last years 26%. TCS reported its EBIT at Rs 7,660 crore against ET Now’s prediction of Rs 7,447 core. “This has been a very satisfying quarter,” Rajesh Gopinathan, CEO & MD said.

“We experienced robust volume growth in Q2, driven by good demand across multiple industry verticals. Strong, broad-based client metrics this quarter demonstrates our increasing success with newer customers. Large deal wins this quarter, a good pipeline, and bottoming out of the retail sector softness positions us well,” he added.

The overall volume growth of TCS was 3.2% QoQ as predicted by many brokerages. The digital revenue of TCS was also up by 5.9% QoQ in constant currency. Rajesh Gopinathan said that the digital services of the company grew more than 30% YoY. “We have been using the Internet of Things and Artificial Intelligence technologies to optimize our clients’ systems,” Rajesh Gopinath said. TCS’ manufacturing revenue was also reported a high of 3.3% Rs 3,288 cr.

In Q1, TCS posted disappointing financial results with its fiscal first-quarter net profit dropping 10% on-quarter to Rs 5,945 crore. Its revenue in rupee terms at Rs 29,584 crores also fell marginally by 0.2% from the preceding three months. Brokerages have predicted a good season for the Indian IT sector and say that it is expected to post the strongest growth in the last five quarters supported by cross-currency gains, with TCS and Infosys leading revenue growth at over 3.2% QoQ. The growth, as analysts say, is due to the support from strong seasonality and cross-currency tailwinds.

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