Tata Consultancy Services (TCS) reported a 1 percent sequential growth in its Q3FY20 profit and clocked revenues worth Rs 39,854 crore, a QoQ growth of 2.25 percent .
The dollar revenue growth for the quarter stood at 1.25 percent and the same in constant currency stoof at 0.3 percent QoQ, which was lower than street's estimates of 1 percent.
The country's largest IT company won deals worth $6 billion during the quarter that ended in December 2019, taking the total of its 9-month deals to $18 billion.
Here are key highlights from TCS' conference call by Narnolia Financial Advisors:
Management participants: Rajesh Gopinathan - CEO and MD, NG Subramaniam - COO, V Ramakrishnan - CFO, Milind Lakkad - Global Head, Human Resources.
The company is closely monitoring the banking, financial services and insurance (BFSI) service vertical where they saw some tightening of its budget from the business of the year. Despite that, the company saw strong deal closures distributed across verticals and geography. This quarter, the company closed $1.8 billion TCV. The company added 20 new logos in BFSI.
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In the short term, the resultant deflation is pulling down TCS' growth in the BFSI segment. However, in seven quarters, it grew materially by 200 percentage points relative to the market share of top six providers. This gives confidence over TCS' position to continue to participate in the demand turnaround in the medium to long term.
In the retail vertical, the company is growing substantially in the UK and Europe. Headwinds are coming from large retailers in US, as some going through financial stress. The company is confident of headwinds bottoming out soon. The momentum will be sustainable for growth in UK and Europe.
Europe continued to outperform for the company while UK on other hand decelerated sharply in the quarter due to Brexit anxieties. BFSI and retail headwinds also caused deceleration of US.
Ignio, TCS' cognitive automation product, has 10 new wins, and 7 went live during the quarter. Ignio's channel partner is also progressing well with 2 new partners on board this quarter, bringing the total number to 6.
TCS Banc has six new wins, and eight went live in Q3. Out of the six wins, two were in the asset services platform, and the remaining four were in areas of core banking, securities trading and securities processing.
The company focused on execution in Q3. With improved utilization and some support from currency, the company managed to expand the operating margin by 100 bps sequentially to 25 percent in Q3.
Going ahead, currency fluctuation can be a headwind while expanding the base of the pyramid to moderate intake at the mid level, and hiring fresher's ongoing basis will benefit margins. Also, higher growth will also play as significant benefit to margins.
The company's total headcount now stands at 4,46,675. It has on boarded 30,000 employees in H1FY20 from its national organized test, out of which 93 percent of trainees have been deployed on projects in Q3.
The company's order book for the quarter was at $6 billion. Of this, North America accounted for $3.3 billion, BFSI from $1.3 billion, and its retail order book was at $860 million. Deal pipeline remains, strong taking the the Total Contract Value (TCV) to $18 billion for 9MFY20 (up 22 percent YoY).
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