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Last Updated : Jul 09, 2019 07:17 PM IST | Source: Moneycontrol.com

TCS Q1 profit flat at Rs 8,131 cr; revenue misses analyst estimates, margin contracts

Revenue growth was broad-based across verticals year-on-year

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IT services provider Tata Consultancy Services has reported sequentially flat profit at Rs 8,131 crore for the quarter ended June 2019, beating analyst estimates. In the March quarter 2019, the profit stood at Rs 8,126 crore. A CNBC-TV18 poll estimate for profit was at Rs 7,820 crore.

A 40 percent sequential growth in other income supported profitability in Q1. The year-on-year growth in profit was 10.8 percent and revenue 11.4 percent.

Consolidated revenue from operations increased 0.42 percent sequentially to Rs 38,172 crore, the country's largest software services exporter said in its BSE filing.

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"We have had a steady start to the new fiscal year. We see customers continuing to spend on their growth and transformation initiatives, and that is showing in our strong order book and deal pipeline this quarter," Rajesh Gopinathan, Chief Executive Officer and Managing Director at TCS said.

Dollar revenue for the quarter at $5,485 million showed a 1.6 percent growth sequentially, which was far below analyst expectations of 3 percent plus growth.

Constant currency revenue growth for the quarter stood at 10.6 percent YoY, the fourth consecutive quarter of double digit growth, against 12.70 percent in Q4FY19 and 9.3 percent in Q1FY19.

Digital revenue, which is one-third of total revenues, grew 42.1 percent YoY and 5.6 percent sequentially.

TCS said revenue growth was broad-based across verticals year-on-year.

Its deal value stood at $5.7 billion, up close to 25 percent YoY.

Life sciences & healthcare led the pack, growing 4.3 percent QoQ, communication & media 3.1 percent and manufacturing 3.7 percent sequentially in dollar terms while among other verticals—BFSI showed a 1.3 percent sequential growth, retail & CPG 1 percent and Hi-Tech 4 percent QoQ in Q1FY20.

Among markets, revenue from North America grew 1.4 percent QoQ due healthy growth in BFSI vertical and Latin America degrew 8.5 percent QoQ in dollar terms; UK grew 1 percent QoQ while Continental Europe grew 3.1 percent QoQ in dollar terms. India reported growth of 5.1 percent QoQ, said Dolat Capital which has reduce rating on the stock with a target price at Rs 2,260 per share.

"Our diversified industry presence, comprehensive digital offerings, and agile way of working, coupled with Business 4.0 framework, enable us to stay relevant to customers. We are confident of the future as we embrace deeply the Machine First philosophy in delivering experiential and modern solutions to clients," N Ganapathy Subramaniam, Chief Operating Officer & Executive Director said.

On operating front, earnings before interest & tax (EBIT) declined 3.3 percent to Rs 9,220 crore quarter-on-quarter and margin contracted to 24.1 percent in Q1, from 25.1 percent reported in March quarter on wage hike and rupee appreciation. A CNBC-TV18 poll estimates for EBIT were Rs 9,305 crore and margin at 24.2 percent for Q1.

"Margins in June quarter fully reflect the annual increments that we effected across the board in April," V Ramakrishnan, Chief Financial Officer at TCS said.

Strong hiring in Q1 resulted in a net addition of 12,356 employees, the highest in the last five years, taking consolidated headcount to 4,36,641 as of June 2019, TCS said, adding the IT Services attrition rate (for last twelve months) stood at 11.5 percent.

"Customers value the lower attrition because it results in greater stability and fewer disruptions in service delivery," said Milind Lakkad, Global Head, Human Resources.

However the attrition is slight higher compared last quarter ending March 30, 2019 at 11.3 percent. Lakkad pointed out the this is seasonal as employees go for higher studies and quit right after performance appraisals.

The company so far applied for 4,682 patents, including 86 applied during the quarter ended June 2019 and has been granted 1,022 patents.

The IT services firm declared an interim dividend of Rs 5 per share.

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First Published on Jul 9, 2019 05:36 pm
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