TCS Q2 beats forecast, net up 24% to Rs 4702 cr

Moneycontrol Bureau

Tata Consultancy Services (TCS) beat street estimates with net profit rising 23.86 percent sequentially to Rs 4,702 crore during July-September quarter.

During the period, revenues jumped 16.6 percent quarter-on-quarter (up 34.3 percent year-on-year) to Rs 20,977 crore, driven by highest volume growth in last nine quarters. The sharp depreciation in rupee also helped IT companies report strong earnings in the quarter gone by.

According to a CNBC-TV18 poll, analysts on an average had expected the country's largest software services exporter to report net profit at Rs 4,527 crore on revenues of Rs 20,850 crore for the quarter.

"We have demonstrated all-round strong growth across markets and industries --life sciences, media, energy & utilities and BFSI --, highlighted by efficient and rigourous execution," N Chandrasekaran, CEO & MD said.

He sees a robust demand pipeline across markets and a unique opportunity to strategically partner and participate with clients.

TCS' USD 100 million plus clients increased to 22 during September quarter from 19 in June quarter.

Dollar revenues grew 5.4 percent Q-o-Q to USD 3,337 million in September quarter, which was in-line with analysts' forecast of USD 3,339 million. All core markets grew smartly with Europe (19.3 percent - partly helped by Alti) , North America (3.68 percent) and UK (7.3 percent) leading the pack, TCS said in its filing. Its Alti acquisition contributed around 1.2 percent to revenue growth.

Volume growth during the second quarter was at 7.3 percent -- highest in last 9 quarters -- as against 6.1 percent in previous quarter.

"The 7.3 percent volume growth was significantly above expectations and also much above the growth reported by Infosys," Dipen Shah, Head of Private Client Group Research at Kotak Securities said. Infosys reported volume growth of 3.1 percent in second quarter.

"The consistent high volume growth reported by TCS for the past several quarters reflects effective demand generation initiatives and efficient execution. The company has been able to effectively identify opportunities in a volatile macro environment and has been able to provide an integrated services approach to clients," Dipen Shah elaborated.

Earnings before interest and tax (EBIT) soared over 30 percent sequentially to Rs 6,329 crore and operating profit margin surged 317 basis points to 30.2 percent, "supported by strong volumes, currency tailwinds and firm execution during the quarter," Rajesh Gopinathan, CEO said.

The company has reported a forex loss of Rs 377 crore during second quarter as against Rs 104 crore in previous quarter, which was largly in-line with analysts' forecast.

Human Resources

The company gross added 17,362 employees and net 7,664 employees during the quarter on consolidated basis.

Utilisation rate (excluding trainees) in the quarter gone by was at 83.4 percent and including trainees was 75 percent.

TCS said the attrition rate last twelve months was stable at 10.9 percent including BPO. "The attrition rate in IT was at 9.9 percent while BPO attrition was higher at 16.3 percent."