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Last Updated : Oct 10, 2019 06:06 PM IST | Source: Moneycontrol.com

TCS Q2 profit below estimates; here are the top takeaways

With an increase of 5.7 percent, revenue from operations stood at Rs 38,977 crore in the September quarter of FY20 against Rs 36,864 crore in the same quarter of the previous year.

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Missing Street expectations, IT bellwether Tata Consultancy Services (TCS) on October 10 reported a subdued set of numbers for the July-September quarter of FY20.

TCS reported a 1 percent sequential decline in the September quarter profit at Rs 8,042 crore, against the June quarter profit at Rs 8,131 crore.

Here are some key takeaways from the company's Q2 scorecard:

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Growth

With an increase of 5.7 percent, revenue from operations stood at Rs 38,977 crore in the September quarter of FY20 against Rs 36,864 crore in the same quarter of the previous year.

"Revenue growth was led by life sciences and healthcare (up 16 percent) and communications and media (up 11.8 percent). All the other verticals - BFSI (up 8 percent), manufacturing (up 7.8 percent), technology and services (up 5.6 percent) and retail and CPG (up 4.8 percent) - continued to grow," the company said.

Constant-currency revenue grew 8·.4 percent YoY while digital revenue grew 27.9 percent YoY.

UK (up 13.3 percent YoY) and Europe (up 16 percent YoY) remained the driver of growth. North America and Asia Pacific grew 5.3 percent and 6.5 percent, respectively. Emerging markets showed steady growth - India (up 7.7 percent), MEA (up 7.3 percent) and Latin America (up 7.3 percent).

Lacklustre operating performance

On the operating performance front, TCS' earnings before interest and tax (EBIT) for the quarter at Rs 9,361 crore declined 4.2 percent year-on-year and margin contracted 250bps YoY to 24 percent, missing analyst estimates of Rs 9,834 crore and 25 percent respectively.

Net profit increased about 2 percent YoY to Rs 8,042 crore in Q2FY20 against Rs 7,901 crore in the corresponding quarter of the previous financial year.

Guidance

The IT major is confident about its medium and longer-term growth.

"We ended the quarter with steady growth despite increased volatility in the financial services and retail verticals. We remain confident as the medium and longer-term demand for our services continues to be very strong, as evidenced by Q2 order book—the highest in the last six quarters," said Rajesh Gopinathan, Chief Executive Officer and Managing Director.

Special dividend

The board of directors have declared a second interim dividend of Rs 5 and a special dividend of Rs 40 per equity share of Rs 1. "The second interim dividend and the special dividend shall be paid on Thursday, October 24, 2019," the company said.

Talent addition

"Hiring continues to be very strong to fulfill the order book. Net addition in Q2 was 14,097, the highest ever number of employees to be on-boarded in a quarter. Consolidated headcount stood at 450,738 as of September 30, 2019," said the company.

The company claimed it continues to be the industry benchmark in talent retention, with the IT Services attrition rate (LTM) at 11.6 percent.

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First Published on Oct 10, 2019 05:54 pm
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