Moneycontrol
Last Updated : Jan 11, 2018 08:27 PM IST | Source: Moneycontrol.com

TCS Q3 profit grows 1.3%, dollar revenue meets estimates; volume growth strongest in 3 years

Constant currency revenue growth for the quarter came in at 1.3 percent, which was lower than 1.7 percent growth in previous quarter and 2 percent in year-ago.

Tata Consultancy Services kicked off the IT sector earnings on Thursday. The IT major has reported sequential profit growth at 1.3 percent in Q3FY18 though seasonally it is weak quarter for software companies.

Lower tax & employees cost and higher other income helped the bottomline beat estimates.

Profit during the quarter increased to Rs 6,531 crore from Rs 6,446 crore in previous quarter, the IT firm said.

Also Read - No big bang opening for TCS on Friday

Revenue in rupee terms grew by 1.2 percent to Rs 30,904 crore and dollar revenue rose 1 percent to USD 4,787 million compared to September quarter, driven by strong deal wins and digital demand.

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Constant currency revenue growth for the quarter came in at 1.3 percent, which was lower than 1.7 percent growth in previous quarter and 2 percent in year-ago.

Revenue growth was driven by manufacturing, retail & consumer business, CMT and others; but impacted by lower banking, financial services and insurance business.

The Tata Group company said its retail & CPG vertical showed a strong turn around, growing 6.4 percent sequentially, energy & utilities (up 8.5 percent QoQ), travel & hospitality (2.9 percent) and life sciences & healthcare (2.5 percent) while BFSI declined 1.5 percent.

Geography wise, revenue from its Latin America business grew by 5 percent QoQ, followed by Continental Europe (2.6 percent) and North America (1.5 percent), it said.

TCS has registered strongest sequential volume growth of 1.6 percent for December quarter in three years.

"New deal ramp-ups, increasing traction in digital, robust demand pick up in retail and continuing momentum in most of industry verticals gave strong volume growth in a seasonally weak quarter," N Ganapathy Subramaniam, Chief Operating Officer & Executive Director said.

Digital business of the company continued to be strong, growing 13.9 percent QoQ and 39.6 percent YoY in constant currency. It contributed 22.1 percent to total revenue during the quarter against 19.7 percent in previous quarter.

The IT major signed its first USD 50 million deal in digital business in Q3.

"Continuing investments by clients in digital initiatives resulted in over more than 150 deal wins and strong growth across all service practices," TCS said.

On overall basis, the company added 3 clients USD 50 million band, 7 in USD 20 million, 9 in USD 10 million and 15 in the USD 5 million category.

Overall numbers met expectations. Profit for the quarter was expected at Rs 6,460 crore on revenue of Rs 30,960 crore, according to average of estimates of analysts polled by CNBC-TV18.

The poll had estimated dollar revenue at USD 4,781 million and constant currency growth at around 1.1 percent for the quarter.

Operating profit margin at 25.2 percent showed an expansion of 0.1 percent QoQ due to lower SG&A expenses. It was below the CNBC-TV18 poll but analysts had said that margin anything above 25 percent would be good.

The IT services attrition rate (last twelve months) fell by 0.2 percent in Q3 to 11.1 percent, while the total attrition rate (including BPS) declined to 11.9 percent, it said.

Other income during the quarter increased 5.86 percent while tax cost declined 7.89 percent and employee expenses fell 0.69 percent QoQ.

The company has been granted 623 patents till date. As of December 2017, it has applied for 3,617 patents, including 100 applied during the quarter.

TCS has declared a third interim dividend of Rs 7 per share, which will be paid to shareholders on January 31.

The stock rallied nearly 11 percent in October-December quarter, which was largely in line with Nifty IT index (up 11.4 percent) but outperformed the Nifty50 that rose 7.6 percent.

Today the scrip closed at Rs 2,788.40, 0.67 percent lower from previous settlement.
First Published on Jan 11, 2018 05:30 pm

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