TCS quarter traditionally weak; had warned of Chennai flood effect
Tata Consultancy Services (TCS) on Tuesday delivered a subdued set of numbers for the three months to December, anticipated for the most part since the company had sounded a profit warning after the Chennai floods disrupted operations at its office for several days. The December quarter is typically a relatively weak period for software firms given the large number of holidays.
TCS reported a sequential decline in dollar revenues although in constant currency terms revenues rose by 0.5% quarter-on-quarter, and in rupee terms they were up 0.7% at Rs 27,364 crore. Operating margins at 26.6% were stable while net profit at Rs 6,109.5 crore was up 0.9%, marginally beating analysts’ estimates.
N Chandrasekaran, managing director and CEO, told the media he had no negative news from customers. “They will continue to invest in the digital space, we need to see how fast they will ramp up. I am not overly concerned about the macro situation and China and I believe opportunities are large with some likely to play out fast and some slowly,” he said.
Chandrasekaran added that the deal pipeline looked good, saying the firm had recorded nine wins in the December quarter. He, however, said some parts of the business — Diligenta, Latin America and India — could remain weak for some time. TCS added one client with a billing of $100 million and two clients with billings of $20 million plus.
Chandrasekaran observed he was not overly concerned about protectionism in overseas countries and about higher visa costs, adding that some of it was to be expected given the unemployment situation. “It’s a one-off cost in the sense it wouldn’t impact all companies,” the CEO said.
Chief financial officer Rajesh Gopinathan said in a statement the quarter had been challenging with significant cross-currency and other headwinds but that the company had generated excellent cash flows. He was referring to the depreciation of the British pound and euro against the dollar.
TCS, the country’s largest provider of software services, said its digital business continued to do well and had reported a 4% sequential growth.
Attrition, the management pointed out, had fallen to an annualised 15.1% during the quarter. The gross employee addition stood at 22,118 while the total headcount was 344,691. Utilisation including trainees was 80.9%.
I am not overly concerned about the macro situation… I believe opportunities are large with some likely to play out fast, some slowly, said N Chandrasekaran, TCS CEO