TCS Q3 profit rises 7.2% to Rs 8,701 crore, constant currency revenue at 4.1% beats estimates

The dollar revenue for the December quarter at $5,702 million grew by 5.1 percent compared to previous quarter, and better than the street estimates of $5,600 million.

"Growing demand for core transformation services and strong revenue conversion from earlier deals have driven a powerful momentum that helped us overcome seasonal headwinds and post one of our best performances in a December quarter," Rajesh Gopinathan, Chief Executive Officer and Managing Director said.

"We are entering the new year on an optimistic note, our market position stronger than ever before, and our confidence reinforced by the continued
strength in our order book and deal pipeline," he added.

He believes Cloud is enabling a new class of boundaryless organizations, that can seamlessly partner and collaborate within larger ecosystems to create innovative purpose-driven offerings to customers.

TCS reported a beat on all leading earnings parameters. Profit was estimated at Rs 8,515 crore on revenue of Rs 41,350 crore, as per the average of estimates of analysts polled by CNBC-TV18.

TCS said all verticals showed good sequential growth, led by Manufacturing (up 7.1 percent), BFSI (up 2 percent), Life Sciences and Healthcare (up 5.2 percent), Communications & Media (up 5.5 percent) and Retail & CPG (up 3.1 percent).

Geography-wise, the sequential growth was led by North America (up 3.3 percent), India (up 18.1 percent), UK (up 4.5 percent), and Continental Europe (up 2.5 percent), while other markets grew as well, with and Asia Pacific growing 2.6 percent, MEA up 6.7 percent, and Latin America up 3.1 percent, the company added.

The country's largest IT services exporter continued to see a strong rebound in growth and transformation services as customers seek to operationalise new models. "Growth in the quarter was led by Cloud Services, Analytics & Insights, Cognitive Business Operations, loT and Quality Engineering & Transformation Platform Services," it said.

"We are confident of being able to get back to aspirational double digit growth trajectory. Our internal target was to get YoY positive by Q3, which we have delivered. Momentum is strong & sustainable, which will lead us to a strong CY21 & FY22," said Rajesh Gopinathan while addressing press conference.

He further said TCS won deals worth $6.8 billion in October-December quarter and would enjoy tailwind of large deals in Q4FY21.

IT Services attrition rate dipped to a new all-time low, at 7.6 percent (last twelve months - LTM), said the IT company in its BSE filing.

At the operating level, its earnings before interest and tax (EBIT) grew by 6.4 percent sequentially to Rs 11,184 crore and margin expanded to 26.6 percent in Q3FY21, 26.2 percent in previous quarter, which was ahead of analysts' estimates despite wage revision. CNBC-TV18 poll estimates were at Rs 10,409 crore and 25.2 percent respectively for the quarter.

"Strong growth across all our verticals, and operational benefits from our SBWS model allowed us to post the highest operating margin in the last five years, even after rolling out a salary increase this quarter," V Ramakrishnan, Chief Financial Officer said.

TCS has declared a third interim dividend of Rs 6 per equity share, which will be paid on February 3, 2021.

The stock rose 32.4 percent in 2020 and 15 percent during the quarter ended December 2020. However, it underperformed the Nifty IT index that gained 55 percent and 21.55 percent, respectively.

TCS completed its buyback offer before the announcement of its third quarter earnings. It acquired 5,33,33,333 equity shares at a price of Rs 3,000 per share through the buyback offer. Hence, the said shares were terminated by the company and as a result, its paid-up capital stands at 3,69,90,51,373 equity shares.

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After the buyback, promoters' shareholding in TCS increased to 72.19 percent, including Tata Sons' at 72.16 percent, from 72.05 percent earlier.