Tata Consultancy Services, India's largest IT firm, on October 8 reported a consolidated net profit of Rs 9,624 crore for the quarter ended September 2021 (Q2FY22), registering a 14.1 percent year-on-year (YoY) growth, driven by broad-based demand and resilient margins. The profit was also driven by other income that increased 21.6 percent YoY (up 54.1 percent QoQ).
The profit growth on YoY basis was after the adjustment for provision for legal claim reported by the company in September 2020 quarter. The reported profit growth was 28.7 percent YoY.
Its consolidated revenue during the July-September period stood at Rs 46,867 crore, up 16.8 percent over a year-ago quarter, with double-digit growth across business verticals, led by ramp-up in order books, recovery in India business and increase in digital spends by corporates. The revenue growth in constant currency came in at 15.5 percent YoY.
"The strong and sustained demand environment is a once-in-a-decade opportunity to position ourselves as the preferred growth and transformation partner for our customers," said Rajesh Gopinathan, Chief Executive Officer and Managing Director. The board has approved his reappointment as MD and CEO for next five years.
"We are using the growth tailwind to invest in strengthening relevant capabilities and building out a comprehensive portfolio of offerings that caters to a broader set of stakeholders in the enterprise across business cycles, strengthening our brand, and making our business more resilient. We believe this is the most sustainable pathway to create longer term value for all stakeholders," Gopinathan added.
On a sequential basis, profit grew 6.8 percent and the revenue increased by 3.2 percent in Q2FY22.
The numbers were largely below the street estimates. A CNBC-TV18 poll of analysts had estimated profit at Rs 9,731 crore on revenue of Rs 47,466 crore for the quarter under review.
At the operating level, EBIT (earnings before interest and tax) margin at 25.60 percent for the September 2021 quarter also missed CNBC-TV18 poll estimates of 26.05 percent. Margin grew by 0.1 percent sequentially, but declined 0.6 percent YoY.
"Strong growth and disciplined execution helped the company overcome headwinds from currency and supply-side inflation and deliver expanded margins," said Samir Seksaria, Chief Financial Officer.
TCS has added five new clients in $100 million plus category, taking the total to 54 now, and there was addition of 17 new clients in $50 million plus band where now it has 114 clients.
All verticals showed strong and double-digit growth on YoY basis, said the company. Manufacturing vertical with 21.7 percent YoY growth, Life Sciences and Healthcare with 19 percent growth, Retail and CPG segment with 18.4 percent and BFSI with 17 percent growth supported the topline during the quarter.
Among others, Communications & Media vertical registered a 15.6 percent YoY growth, and Technology & Services grew by 14.8 percent in Q2FY22, said the company.
"Products and platforms, TCS BaNCS, Quartz SmartLedgers, TwinX and TCS Cognix, all had marquee wins during the quarter and are increasingly driving business and operating model transformations in many markets," said N Ganapathy Subramaniam, Chief Operating Officer & Executive Director.
Geography wise, the growth was led by North America that grew by 17.4 percent compared to corresponding period of last fiscal. United Kingdom business has grown 15.6 percent and Continental Europe grew 13.5 percent.
Among emerging markets, India was ahead with growth at 20.1 percent YoY, followed by Latin America (up 15.2 percent), Middle East & Africa (up 13.8 percent) and Asia Pacific (up 7.6 percent).
The employees strength in the country's largest IT company increased to 5,28,748 after net headcount addition of 19,690 in the September 2021 quarter.
IT services attrition rate (last twelve months) at 11.9 percent was the lowest in the industry. While addressing press conference after earnings, the TCS management said these attrition levels were concerning but the company can manage. "We believe these attrition levels will continue for next two-three quarters."
The company has announced a second interim dividend of Rs 7 per share, which will be paid to shareholders on November 3 this year.
TCS share price, which hit a fresh record high of Rs 3,990 earlier in the day, gained 1.1 percent to close at Rs 3,935.30 ahead of the September quarter earnings, with a market capitalisation at over Rs 14.5 lakh crore.
Thus far in the current fiscal year, TCS stock has gained 22.5 percent whereas its peers Infosys and HCL Technologies have rallied nearly 24 percent and 33 percent, respectively.
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