Tata Consultancy Services (TCS), India’s biggest listed company in terms of market capitalisation, on Thursday reported a 24.1 per cent rise in net profit at Rs 8,105 crore for the quarter ended December 2018 as against Rs 6,531 crore in the same period a year ago, aided by gains in key verticals across all geographies.
Revenue rose by 20.8 per cent at Rs 37,338 crore in the December quarter against Rs 30,904 crore last year. However, operating margin fell 90 basis points to 25.6 per cent on a sequential basis. This was lower than estimated and also the biggest sequential decline since April-June of 2017-18. On a year-on-year basis, the operating margin expanded by 0.4 per cent despite the rupee volatility.
Commenting on the Q3 performance, Rajesh Gopinathan, chief executive officer and MD, said: “We are wrapping up 2018 with a strong revenue growth of 12.1 per cent in the December quarter, which is the highest in 14 quarters, with continued growth acceleration in key verticals and across all geographies.”
Gopinathan said the strong client metrics, industry leading growth in digital services, a very strong order book and deal pipeline are all validations that customers recognise TCS’ differentiated capabilities and are picking the company for their growth and transformation programmes. “On a secular basis, as large segments of the economy go through churn driven by digital disruption, enterprises are responding with technology-powered strategies — as inalgorithmic retailing or connected cars — creating a huge opportunity for services providers like us,” he said.
“Our investments in research and innovation, our deep domain and contextual knowledge, intellectual property and our collaborative approach to co-innovation, have been key to our participation in this opportunity. This quarter, we launched a new brand, TCS Pace embodying these capabilities and offering our customers a line of sight to success in a Business 4.0 world,” Gopinathan said. According to him, revenue growth continued to accelerate by 8.6 per cent in the in BFSI segment as against 6.1 per cent growth in Q2. Growth was led by energy utilities (18.1 per cent), life sciences & healthcare (15.7 per cent), communications & media (10.8 per cent) and retail & CPG (10.5 per cent).
QoQ operating margin drop shows bumpy road ahead
Despite the volatility in the rupee value, India’s most valued company has managed to notch up an impressive rise in quarterly net profit and revenue. However, the marginal decline in operating margin on a sequential basis shows that the road ahead is not smooth. The company, however, expects growth acceleration in key verticals across all geographies in the coming quarter. The Tata group flagship is banking on growth in digital services, a strong order book and deal pipeline to lead India’s tech party.
N Ganapathy Subramaniam, chief operating officer & executive director, said: “Our location independent Agile methodology and Machine First approach have been key in helping us advance CEO-level enterprise transformation agendas.” V Ramakrishnan, chief financial officer, said: “Despite headwinds from the rupee volatility … and the higher cost of doing business in some major markets, our operating margins have been resilient…” TCS shares closed almost flat at Rs 1,888.15 on the BSE on Thursday. The company’s market capitalisation stood at Rs 708,506 crore.
“TCS continued to attract very diverse talent in its ranks. Net addition in Q3 was 6,827 employees, bringing the total employee strength at the end of Q3 to 417,929 on a consolidated basis. The percentage of women in the workforce rose further to 35.8 per cent, while the total number of nationalities represented grew to 151,” TCS said in a statement.
The company said it continues to invest heavily in organic talent development. “These initiatives resulted in employees logging a cumulative 14.2 million learning hours. Over 292K employees have now been trained in digital technologies, and over 318K employees in Agile methods, making this the world’s largest Agile-ready workforce. TCS continued to have the best retention rate in the industry, with IT Services attrition rate (LTM) at 11.2 per cent,” it said.
“TCS has navigated technology change in the digital era by investing in equipping employees with skills on newer technologies while valuing them for their contextual knowledge…,” said Ajoy Mukherjee, executive vice president and global head, Human Resources.