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Last Updated : Jul 11, 2018 08:55 AM IST | Source: Moneycontrol.com

TCS Q1 earnings beat estimates; 10 key takeaways from June quarter

The stock closed down 0.56 percent at Rs 1,877 ahead of its earnings announced later in the day today, but during the quarter ended June, it had surged nearly 30 percent to Rs 1,847.20.

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5. Tata Consultancy Services (TCS) | Offices: Ahmedabad, Bangalore, Bhopal, Bhubaneswar, Chennai, Coimbatore, Gandhinagar, Gurugram, Hyderabad (Photo: Reuters)
5. Tata Consultancy Services (TCS) | Offices: Ahmedabad, Bangalore, Bhopal, Bhubaneswar, Chennai, Coimbatore, Gandhinagar, Gurugram, Hyderabad (Photo: Reuters)
 
 
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Country's largest software services exporter Tata Consultancy Services started off the financial year 2018-19 on a strong note as June quarter earnings beat analyst expectations on Tuesday.

"We are starting the new fiscal year on a strong note, with the growth engine firing on all cylinders," CEO and MO, Rajesh Gopinathan said in company's filing.

"Banking vertical recovered very nicely this quarter, while other industry verticals maintained their momentum," he added. "With a good set of wins during the quarter, a robust deal pipeline and accelerating digital demand, we are positioned well for the future."

The stock closed down 0.56 percent at Rs 1,877 ahead of its earnings announced later in the day today, but during the quarter ended June, it had surged nearly 30 percent to Rs 1,847.20.

Here are 10 key takeaways from the April-June quarter:

Profit

The IT services company has reported profit at Rs 7,340 crore for the quarter, registering a growth of 6.3 percent over Rs 6,904 crore in previous quarter.

The growth was driven by other income as well as revenue from operations.

The net income was higher compared to analyst forecast of around Rs 7,000 crore for the quarter.

Revenue

Revenue from operations during the quarter increased 6.8 percent to Rs 34,261 crore compared to Rs 32,075 crore in last quarter of FY18.

Analyst had estimated revenue at around Rs 34,000 crore.

Dollar revenue in Q1 grew by 1.6 percent quarter-on-quarter to $5,051 million while constant currency revenue growth stood at 4.1 percent QoQ, the highest in last 15 quarters.

Digital revenue contributed 25 percent to total revenue, growing 44.8 percent YoY against 42.8 percent growth in Q4FY18.

Operational income

Earnings before interest and tax (EBIT) grew by 5.3 percent sequentially to Rs 8,578 crore but margin contracted 36 basis points to 25.04 percent due to wage hike.

Margin contraction is far better than estimates of around 100 bps.

"Disciplined execution, accelerating growth and currency support helped us mitigate the impact of wage increases during the quarter," V Ramakrishnan, Chief Financial Officer said.

Selling, general and administrative expenses rose 3.6 percent quarter-on-quarter to Rs 5,600 crore in Q1.

Clients Addition

TCS has added 2 new clients in $100 million category and 13 clients in $5 million band.

Industries

Revenue growth accelerated in BFSI (up 4.1 percent YoY and 3.7 percent QoQ) and Retail & CPG (up 12.7 percent and 3.6 percent) in Q1. Growth was led by the Energy & Utilities vertical (up 30.9 percent and 5.2 percent).

Manufacturing business grew by 2.3 percent QoQ, Telecom & Media 5.1 percent, Life Sciences & Healthcare 4.3 percent, Technology & Services 2.4 percent, Energy & Utilities 5.2 percent, and Regional Markets & Others 5.9 percent.

Geography wise performance

North America business bounced back growing 7 percent YoY (3.7 QoQ) on the back of BFSI and Retail recovery.

UK business showed 18.7 percent rise YoY (8.2 percent QoQ), Continental Europe 18.6 percent (5.3 percent QoQ), and AsiaPacific 10.8 percent (3.6 percent QoQ), which all led the overall growth.

Latin America business grew by 2.6 percent QoQ but India fell 1 percent and MEA (Middle East and Africa) was down 4.6 percent.

Services

Business & technology services had a strong quarter with several key deal wins and a healthy pipeline across all service lines.

In digital transformation services, all services saw strong growth and a healthy pipeline, as customers navigate the complexities of digitally re-imagining their business, the company said. "Q1 saw strong demand for Cloud advisory and migration services, cyber-security including GDPR, identity & access management and managed security services, intelligent process automation, TCS Enterprise Cloud Platform, Interactive services, loT & Analytics services."

Human Resources

Total employee strength at the end of June quarter crossed the 4 lakh mark and stood at 4,00,875 on a consolidated basis.

"The percentage of women in the workforce rose further to 35.6 percent, while the total number of nationalities represented grew to 143, TCS said.

The IT services attrition rate (last twelve months) fell further by 0.1 percent in Q1 to 10.9 percent, while the total attrition rate (including BPS) fell to 11.7 percent.

"We continue with investments in upgrading the technology skills of people, while leveraging their contextual knowledge and domain experience. This has resulted in not only a very nurturing and dynamic work environment, but also a strong digital solutioning capability that delivers differentiated outcomes for our customers," Ajoy Mukherjee, Executive Vice President and Global Head, Human Resources said.

Research and Innovation

As of June 30, 2018, the company has applied for 3,978 patents, including 62 applied during the quarter, and has been granted 715 patents.

Dividend

The board of directors of the company have declared an interim dividend of Rs 4 per share.

The interim dividend will be paid to the equity shareholders of the company on July 25, 2018.
First Published on Jul 10, 2018 05:50 pm
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