The Mumbai-based company said on Friday its fiscal third-quarter net profit grew 7.3% from a year earlier to Rs 8,701 crore, on revenue of Rs 42,015 crore. It expects a multiyear growth cycle for the industry, as global clients transform to digital services and shift their applications to the cloud.
“We are very confident that we should be able to get back to our aspirational double-digit growth trajectory,” Gopinathan told reporters after TCS exceeded analyst expectations with its third-quarter performance. “Whether you compare a calendar year to calendar year or financial year FY22 to FY21, or even FY22 to FY20 … overall we believe we are in a very positive cycle.”
In constant currency terms, or based on a fixed exchange rate, revenue grew 0.4% from a year earlier. In dollar terms, the company reported revenue of $5.70 billion, up 4.1% on constant currency terms from the July-September quarter and 0.4% on year. It also announced a Rs 6 per share interim dividend.
“TCS reported pretty strong growth at 4.1% constant currency growth (QoQ); we were building about 3.5%. So, it is a decent beat on the top line as well as margin, it (QoQ margin) expanded 40 basis points (0.4 percentage point),” said Apurva Prasad, IT analyst at HDFC Securities. “A lot of business verticals have grown very well … the margin is also at an all-time high. The lowest attrition is also seen as a positive trend.”
TCS kicked off the results cycle among top Indian IT companies in the third quarter. Infosys and Wipro are scheduled to report their earnings on January 13, followed by HCL Technologies on January 15.
IT STOCKS RALLY
TCS shares closed 2.89% higher on the BSE on Friday at Rs 3,120.35. The company reported results after market hours. The benchmark Sensex closed 1.43% up, led by a rally in IT and auto stocks.
On Friday, Tech Mahindra joined the list of companies with a Rs 1 trillion market capitalisation on the BSE. The IT firm’s shares closed 5.64% higher at Rs 1,050.95, after hitting an all-time high of Rs 1,059.95.
Infosys and Wipro also hit all-time highs of Rs 1,316 and Rs 432.6, respectively intraday. Infosys closed 3.95% up at Rs 1,311.80, while Wipro ended 5.75% higher at Rs 430.15 on the BSE.
Expectations of a strong performance by IT companies and possible revision in growth guidance resulted in the rally. Shares of technology companies have been gaining for the last few months. The Nifty IT index has risen 64% in the last year, compared with a 19.3% gain for the broader Nifty Fifty.
Gopinathan said TCS was entering the new year on an optimistic note, based on the strength in the order book and deal pipeline.
“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,” the CEO said.
The company reported deals worth more than $6.8 billion in the quarter through December, not counting the acquisition-led business from Postbank Systems, a Deutsche Bank unit that it acquired last month.
The IT services major saw the lowest ever employee attrition during the third quarter at 7.6%.
The management said the company’s growth momentum had revived.
Gopinathan said: “Both in revenue and in constant currency revenue terms, we have now achieved the year-on-year revenue parity that we spoke about. We have done it in Q3 on target, and on the margin side — both on reported margin and on constant currency margin — we have achieved margin parity to Q4 levels (of FY20) in Q3 itself.”
Margin improved by 1.6 percentage point from a year earlier to 26.6%, despite wage hikes in October. The company saw growth across verticals and geographies, as clients looked to cut costs and shift their technology investments to cloud.
Its revenue had dropped 6.3% sequentially in the fiscal first quarter due to the business uncertainty following the Covid-19-induced lockdown globally. In the second quarter through September, it grew 4.8% from the previous three months.
ICICI Securities lead analyst Sudheer Guntupalli said there were no major surprises in the performance, “Verticals and geographies, which did not recover in the September quarter, have shown recovery in the third quarter. We will have to wait and watch to see how actual growth pans out as we are in a recovery phase.”