The country’s largest software exporter Tata Consultancy Services on October 11 reported a double-digit annual rise in its revenue for the September quarter, which it expects to maintain for the rest of the year.
TCS reported a rise of 11.5 percent in its revenue in constant currency terms for the September quarter. This was the first time in two years that the company reported double-digit annual growth in its quarterly revenue.
“Two years ago we stepped down from double digit growth and we have returned to double digit growth (this quarter)…we have numbers on board and momentum to ensure double digit trajectory continues for the rest of the year,” said Rajesh Gopinathan, Chief Executive Officer at TCS, in a post-earnings interaction with the press.
Digital revenue accounted for 28 percent of the company’s overall pie and rose 60 percent annually in constant currency terms.
TCS on Thursday reported revenue above an average of analysts’ estimates, helped by improved client spending in the banking, financial services and retail verticals, and continued momentum in the digital business.
Revenue in the September quarter rose 7.6 percent on quarter to Rs 36,854 crore. Analysts polled by Reuters, on average, had expected the company to report revenue of Rs 36,484.2 crore.
Profit in the second quarter rose to Rs 7,901 crore, from Rs 7,340 crore in the June quarter. Reuters analysts, on average has expected TCS to post a profit of Rs 7,959.9 crore for the September quarter.
The Mumbai-headquartered company signed deals worth nearly $4.9 billion during the second quarter. Its operating margin for the quarter was 26.5 percent, within the 26-28 percent target range TCS had set for itself.
BFSI and retail
BFSI and retail, two large verticals at TCS that have been stressed over the past year, also showed higher growth this quarter, indicating better times ahead.
While Gopinathan said BFSI customers were upping the spend, and “money is hitting the ground,” retail was not “structurally out of the woods yet”.
While retail clients in North America, including large brick and mortar names, are putting in significant investment in retail, one-off issues cannot be ruled out.
Revenue growth in BFSI rose 6.1 percent annually during the second quarter, compared to a rise of 4.1 percent in the first quarter.
Retail & CPG growth was 15.6 percent in the September quarter, compared with 12.8 percent annual growth in the previous quarter.
“TCS’ brand and existing client base has helped bring in success specifically in two industries which must embrace the digital way of life in whatever they do: BFSI including Fintechs and Insurtech and Retail,” said Sanjoy Sen, doctoral research scholar, Aston Business School, UK.
He added that share prices, which were bound to rise after TCS’ Rs 16,000 crore buyback, would now likely be fuelled further by optimistic sentiment.
Employee focus
In the reported quarter, TCS introduced a “TCS National Qualifier Test” to ‘democratize entry-level talent.’
Gopinathan said the test saw participation from 2,00,000 candidates from 1,800 institutes.
Ajoy Mukherjee, Executive Vice President and Global Head, Human Resources, said 28,000 offers will be made after the test, subject to people accepting the offers.
TCS reported a net addition of 10,227 employees in the September quarter, which it claimed was the highest in 12 quarters. IT Services attrition remained unchanged at 10.9 percent, among the lowest in the industry.
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