India’ IT major TCS reported a flat growth in earnings, as net profit came in at Rs 6,531 crore against Rs 6,778 crore in the comparable quarter last fiscal, beating street estimates. Notably, revenue in rupee terms rose 4% percent sequentially to Rs 30,904 crore, from Rs 29,735 crore last fiscal. In the last quarter, the company had reported a 4.3 per cent rise in revenue to Rs 30,541 crore. Volume rose 1.4% on a quarterly basis. EBIT margin came in at 25.2% as against a CNBC TV18 poll of 25.8%. In constant currency terms revenue growth was 6.2% on year while 1.3% on quarter.
A CNBC TV18 analyst poll had estimated the net profit at Rs 6,460 crore. Analysts had also expected dollar revenue to increase by 0.9 percent quarter-on-quarter to USD 4,781 million from USD 4,739 million and constant currency growth to be around 1.1 percent. In the previous quarter, the company had reported a 8.4% on year rise in net profit to Rs 6,446 crore, while it had reported a 4.3% on year rise in revenue to Rs 30,541 crore.
Brokerage Nomura India had said that while the company has been cautious on the BFSI space, it has been suggesting an improvement in the retail vertical and is confident on other verticals, too. “Our EBIT margin estimate for Q3 stands at 24.9 per cent, down 20 bps QoQ. This would be below the lower end of the guided range of 26-28 per cent for the fourth straight quarter. Our PAT estimate stands at Rs 6,390 crore, down 0.8 per cent QoQ, led by lower other income,” Nomura said in its report.
“While the rupee is not expected to play margin spoilsport during the quarter, we believe margin could contract 30 bps QoQ on account of muted revenue growth. Commentary on demand outlook and client budgets in key verticals of BFSI and Retail will be keenly monitored. We reiterate that TCS is a dividend play until demand in key verticals of BFSI and retail improves,” research and brokerage firm Edelweiss had noted.
Brokerages also point out that the quarter has seasonally been weak due to holidays in the United States. “The September-December quarter has seasonally been a weak quarter for IT companies, owing to furloughs and holidays in the US Unlike Q3FY2017, this time the already-challenging business environment was relieved from cross-currency headwinds, though there were cross-currency tailwinds during the past two sequential quarters,” Sharekhan said in a note.
The company shares closed in the red today, as investors turned cautious ahead of results from the software giant. The stocks closed 0.5% lower at Rs 2,792 on NSE this afternoon.