Lifesciences deliver; BFSI, retail drag TCS' growth in Q3: Key takeaways

Mumbai: Tata Consultancy Services (TCS), India’s largest software exporter, on Friday reported an in-line 0.20 per cent year-on-year rise in December quarter profit on the back of a single-digit rise in revenues from a year ago.

October-December is considered a seasonally weak period for the sector. The company logged Rs 8,118 crore profit for this period compared with Rs 8,105 crore net reported for the same quarter last year. Analysts in an ET NOW poll had estimated the number at Rs 8,189 crore.

TCS’s revenue for the quarter rose 6.7 per cent to Rs 39,854 crore compared with Rs 37,338 crore a year ago. Operating margin for the quarter came in at 25 per cent and net margin at 20.4 per cent.

“In a seasonally weak quarter, characterized by furloughs across multiple industry verticals, we focused on execution, while continuing to invest for future growth,” said N Ganapathy Subramaniam, Chief Operating Officer & Executive Director.

“Having onboarded over 30,000 trainees in the first half of the year, we worked on driving up utilisation in Q3 and had good outcomes. Our client metrics were very good, with additions across most revenue buckets,” he said.

Here are the key takeaways from TCS’ earnings report:

Dividend Bonanza: The IT major announced an interim dividend of Rs 5 per share for the quarter.

Management commentary: “We saw the sectoral trends of the first half of the year continue to play out in the third quarter. Our robust order book during the quarter reflects our ability to pitch innovative technology solutions to address the business needs of different stakeholders in the enterprise, and participate in our customers’ enterprise-wide transformation initiatives,’ said Rajesh Gopinathan, CEO and managing director.

Life Sciences/Healthcare stand out: Revenue growth was led by life sciences & healthcare (+17.1 per cent) segment, followed by communications & media (+9.5 per cent) and manufacturing (+9.2 per cent). Among other verticals, BFSI (+5.3 per cent), retail & CPG (+5.1 per cent) and technology & services (+3.3 per cent) all showed more modest growth.

European markets led the charge: Growth was led by Europe (+15.9 per cent), MEA (+10.8 per cent) and the UK (+7.5 per cent). North America and Asia Pacific grew 4.1 per cent and 5.7 per cent, respectively. India grew 6.4 per cent while Latin America grew by 6.2 per cent.

Consulting & services integration: The company saw strong growth in Q3, led by next-gen enterprise transformation services, M&A, divestiture and Supply Chain as a Service.

Digital transformation services: The MFDM framework which integrates automation, analytics and Al has been central to many core transformation deals. Growth in Q3 was led by enterprise intelligent automation, cyber security, loT and enterprise application services.

Cognitive business operations: TCS continues to see strong growth in managed hybrid cloud services. The company’s new operating models leveraging service reliability engineering, AIOps powered by Ignio and Agile are seeing strong traction. Q3 order book was the strongest in the last several quarters.

Research and innovation: As on December 31, the company has applied for 5,006 patents, including 132 applied during the quarter, and has been granted 1,211 patents.

Modest addition to head count: Net addition of employees stood at 22,390. Following the high levels of hiring in H1 FY20, headcount addition moderated in Q3. The company’s IT Services attrition rate (LTM) stands at 12.2 per cent. Net of attrition, the headcount stood at 446,675 as of December 31.


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