India’s largest information technology firm Tata Consultancy Services’ fiscal second quarter earnings beat street expectations on most counts, with net profit growing over 8 percent, revenue rising over 18 per cent, attrition peaking, margins coming in above estimates, strong demand continuing across sectors, and a robust order book. Further, the company also delighted shareholders with an interim dividend for the quarter, its second for the fiscal year to date. “There was strong, broad-based growth for all services in Q2, led by Cloud, Enterprise Application Services, and Cyber Security,” the company said in a statement. TCS bagged new deals worth $8.1 billion in Q2 compared with $8.2 billion in Q1.
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Highlights from TCS Q2 results:
Net profit: TCS net profit surpassed the analysts’ estimates and rose by 8 per cent to Rs 10,431 crore from the same quarter previous year, helped by continued strong demand. “Our order book is holding up well, with a healthy mix of growth and transformation initiatives, cloud migration and outsourcing engagements,” said Rajesh Gopinathan, Chief Executive Officer and Managing Director, TCS. He added that the clients are now embracing technologies like cloud, and TCS has ‘the combination of contextual knowledge, technology expertise and execution rigor to deliver on this imperative’.
Revenue: Tata Consultancy’s revenue rose by 18 per cent on-year to Rs 55,309 crore in three months to September. This was also higher than the Rs 54,881 crore consensus estimate of analysts tracked by Bloomberg. However, its operating margin contracted from 1.6 percentage points on-year to 24 per cent. Further, in terms of constant currency, TCS quarterly revenue grew 15.4 per cent on-year.
Dividend: TCS declared a second interim dividend of Rs 8 per share for its shareholders. The fiscal second quarter dividend is in addition to an interim dividend of Rs 8 per share announced in the previous quarter as well.
Markets & sectoral performance: In terms of markets, while North America was on the top of the charts with 17.6 per cent growth, UK grew 14.8 per cent and Europe grew 14.1 per cent. Among emerging markets, India registered 16.7 per cent growth, Latin America grew 19.0 per cent, Middle East Africa showed 8.2 per cent growth and Asia Pacific grew 7.0 per cent. In terms of sectoral performance, the filing showed broad-based growth across verticals, led by retail which showed 22.9 per cent growth and Communications & Media that grew 18.7 per cent. Other sectors like Technology & Services grew 15.9 per cent, Manufacturing as well as Life Sciences & Healthcare verticals grew 14.5 per cet, and BFSI grew 13.1 per cent.
Employees: With a total workforce strength of 616,171, TCS added a net of 9,840 employees during the quarter. The company’s women workforce is 35.7 per cent of the total strength. The attrition rate in IT services was 21.5 per cent on the last twelve months basis, but the company said it is now peaking. “We believe our quarterly annualized attrition has peaked in Q2 and should see it taper down from this point, while compensation expectations of experienced professionals moderate,” said Milind Lakkad, Chief HR Officer, TCS. In the second quarter, TCS employees registered 11.7 million learning hours, resulting in the acquisition of 1.5 million competencies.