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Net profit at 6,778 crore: TCS profit up 10.9% on rise in digital services demand

Revenue of the company jumps 8.7% at `29,735 cr in the third quarter of 2016-17

By: ENS Economic Bureau | Mumbai | Updated: January 13, 2017 1:34:35 pm
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Aided by rising demand for digital services, Tata Consultancy Services (TCS), India’s biggest software services company, has posted a better-than-expected 10.9 per cent jump in the net profit to Rs 6,778 crore ($1 billion) for the third quarter of the current fiscal as against a profit of Rs 6,109 crore in the same period of last fiscal. The company has reported a 2.9 per cent rise in quarter-on-quarter profit.

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Revenue of the company rose 8.7 per cent at Rs 29,735 crore in the third quarter of 2016-17, from Rs 27,364 crore in the year-ago period. Revenue grew 1.5 per cent from the September quarter. “The resilience of our business model and strength of our operating strategy has been brought to the fore by our performance in Q3, traditionally a quarter of weak demand,” TCS MD and chief executive N Chandrasekaran, who was later selected as the chairman of Tata Sons, said.

“Our strengths in digital, platforms and cloud as well as our deep knowledge of the customers’ domain are driving our ability to play a strategic role and make a holistic impact on the business,” he said.

“To support and sustain our digital business that is growing at 30 per cent on an annual basis, we continue to build new capabilities in digital technologies, empower employees to enhance agility in the workplace and invest more to develop IP-based platforms and products. Some of these products and platforms are maturing with greater customer adoption while others continue to be incubated in our Innovation labs. As digital adoption increases in 2017, we are well prepared to lead this change,” Chandrasekaran said.

Regarding “headwinds” in the US like limited number of H1-B visas being issued and higher visa fees, he said the firm is proactively addressing these concerns by making changes to its business model. “From headwind point of view, I think there will be some visa regulatory changes. There are two possibilities, especially when you look at the US visa. One with regard to the visa fee. The second is a commentary on the number of visas one will get. I think we are addressing both very proactively,” Chandrasekaran said.

He said more than a year ago, the company had decided that it will have to operate in a “visa constrained regime” in the future. Its US visa applications narrowed to 4,000 in 2016 as against 14,000 in the previous year and only a third of them were granted last year, he said.

“Alongside a good growth performance, we have been able to keep profitability stable in our desired range and deliver over $1 billion in free cash flow during the quarter,” TCS chief financial officer Rajesh Gopinathan said. The company declared a dividend of Rs 6.5 per share and its earnings per share (EPS) stood at Rs 34.40.

TCS said employee addition during the quarter stood at 18,362 (gross) and 6,978 (net), taking the overall count to 3,78,497 people. The total attrition rate fell to 11.3 per cent in IT services. It was at 12.2 per cent including BPS. The percentage of women employees at the company rose to all-time high of 34.6 per cent.

During the third quarter, growth was led by energy and utilities (up 5.8 per cent sequentially), Hi-Tech (2.6 per cent), banking, financial services and insurance (2.1 per cent), manufacturing (2.1 per cent) and retail (1.9 per cent) in constant currency. From a geography perspective, emerging markets like Latin America and India clocked double digit growth of 12.5 per cent and 10.3 per cent sequentially.

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