Tata Consultancy Services on Monday reported a good set of numbers for the three months to March with dollar revenues clocking in a sequential growth of 1.5 per cent. The IT major, however, reported a slight dip in operating profit margins of about 54 basis points to 26.1 per cent. The revenues in rupee terms as per the IFRS system at Rs 28,449 crore, a rise of 4 per cent sequentially, beat the Street’s expectations. Net profits were higher by 3.8 per cent quarter-on-quarter and 64.4 per cent year-on-year at Rs 6,341 crore.
Natarajan Chandrasekaran, CEO and managing director said at a media interaction, that while the exit rate for the firm in constant currency terms may have been lower in Q4, the headwinds facing the business had receded and that the current year should be a good one. “We are in a better position than we were six months ago,” Chandrasekaran observed.
TCS’ digital business is gaining momentum and accounted for 15.5 per cent of revenues in Q4FY16, growing at 52.2 per cent in FY16. “The digital theme is picking up pace, whether its cloud or analytics, and we expect it to become main street,” the CEO said.
Commenting on the $980 million fine imposed on the firm by the Madsion disctrict court in the case filed by Epic — a Verona-based electronic medical records vendor — the managing director said the company was “in touch with those we need to be in touch with”. “We don’t have an issue,” Chandrasekaran said. TCS nevertheless plans to provide for the entire amount as a contingent liability.
The management attributed the good Q4FY16 numbers to volume-led growth in the BFSI space as also a good performance in key markets like continental Europe and North America. The insurance vertical has turned around while Diligenta is more or less close to a bottom.
“While Latin American market has reported good growth momentum in the last two quarters, the energy segment has done well in the current quarter,” the CEO observed. He indicated, however, that the business in Japan could take a while to turn around although a fall in revenues from the region was not expected going ahead.
While announcing gross hires of 45,000 Chandrasekaran observed that lateral hiring this year would be significantly lower. One reason for this was the lower attrition rate of 15.5 per cent. The CEO pointed out there were opportunities for productivity adding that the incremental revenue per person had risen considerably over the years. “Technology is helping automation,” the CEO said.
For FY16, TCS reported dollar revenues of 7 per cent, the lowest in at least five years. Moreover, with prices remaining flat, much of revenues were driven by volume growth. In constant currency terms, however, revenues grew a firm 11.9 per cent. FE