TCS net profit up 4.3%, clocks Rs.6,586 crore

Leading IT services firm Tata Consultancy Services (TCS) on Thursday reported a 4.3% growth in net profit for the quarter ended September 30, 2016 at Rs 6,586 crore compared with Rs 6,317 crore in the sequential quarter (Q1FY17). 

Revenues for TCS, however, degrew 0.1% sequentially to Rs 29,284 crore against Rs 29,305 crore in Q1FY17.“It has been an unusual Q2 for TCS. Growing uncertainties in the environment is creating caution among customers and resulted in holdbacks in discretionary spending this quarter. In addition, volatility in markets like India and Latin America also muted revenue growth,” TCS managing director and chief executive officer N Chandrasekaran said. 

“With technology increasingly at the forefront of business, we are confident that this is temporary,” Chandrasekaran added.As far as major client additions are concerned, the company added one client in the over $50 million revenue band and six in the over $20 million revenue band.

Operating margins for TCS during the quarter grew 94 basis points to 26% compared with 25.1% in Q1FY17. Digital revenues for the company during the quarter stood at 16.1% compared with 15.9% in the sequential quarter. 

During Q2, growth was led by life sciences and healthcare



which grew at 4.7% sequentially in constant currency followed by energy and utilities (up 3.6%), manufacturing (up 3.1%), travel and hospitality (up 2.3%) and communication and media which grew 2%. 

From a geography perspective, Europe saw strong growth at 3.7% and Asia Pacific at 3.5% sequentially in constant currency while North America grew 1.4% sequentially and the UK was flat. India declined by 7.6% sequentially and Latin America also continued to show volatility.

In terms of employee additions, the company added 22,665 employees on a gross basis and 9,440 employees on a net basis during the quarter.  The total attrition rate (LTM) fell to 11.9% in IT services and was at 12.9% including BPS. The percentage of women in TCS rose to an all-time high of 34.3% while the number of nationalities was at 129. 

According to brokerage firm Emkay, TCS missed revenue expectations and the stock is likely to react negatively in initial trades. “TCS’s September 2016 quarter results have missed expectations on revenue growth with company’s 1% quarter-on-quarter constant currency revenue growth being the lowest sequential growth in the company’s reporting history in an otherwise usually strong period,” Emkay said.