The third-quarter earnings season started with a bang on Friday with Tata Consultancy Services (TCS) — which beat Street estimates on strong deal wins as clients across geographies and verticals embraced the digital transformation after Covid.
The October-December 2020 period was the best third quarter for TCS in nine years.
The country’s largest IT services provider saw net profit for the quarter rise 7.18 per cent to Rs 8,701 crore from Rs 8,118 crore a year ago.
At a virtual press conference after the results, Rajesh Gopinathan, chief executive officer and managing director, sounded optimistic about the company’s prospects both for the current calendar year and the next fiscal.
He said the company was confident about achieving a double digit revenue growth for the next fiscal.
“The momentum (seen so far) we believe is strong and sustainable, and it should lead to a strong calendar year 2021 and financial year 2021-22,’’ Gopinathan said.
“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,” Gopinath said.
Analysts were expecting TCS to come out with a strong scorecard: they had pencilled in net profits of around Rs 8,500 crore, while revenues were expected at around Rs 41,000 crore. TCS posted revenues of Rs 42,015 crore, a growth of 5.4 per cent over Rs 39,854 crore a year ago.
In dollar terms, the revenues came in at $5.7 billion which were above the forecast of $5.6 billion. Revenues in constant currency terms showed a rise of 4.1 per cent on a sequential basis.
The total contract value (TCV) or deal wins at a robust $6.8 billion was the highlight of the quarter. There was a positive surprise on the operating margins as well: at 26.6 per cent and a 40 basis points growth over the preceding quarter.
The Street was expecting the margins to soften because of the wage hikes that were given during the period.
TCS has declared an interim dividend of Rs 6 per share.
At the media meet, Gopinathan said the company had reached the target made at the beginning of this fiscal to achieve a positive year-on-year growth in revenues and margins on a constant currency basis in the third quarter.
He added the strong growth seen across geographies and verticals was the most encouraging aspect of its performance during the third quarter.
For instance in North America, which is the company’s largest market, the momentum picked up with a sequential growth of 3.3 per cent.
Similarly, a volatile market such as the UK saw a constant currency growth of 4.5 per cent. In terms of verticals, the largest — BFSI (banking, financial services & insurance) — showed a 2 per cent growth in an otherwise seasonally weak period.
Other sectors such as retail, life sciences and healthcare, too, posted stellar growth.The company added over 15,700 people on a net basis to take the overall headcount to 4.69 lakh. The attrition stood at lowest ever rate of 7.6 per cent.
Chief of human resources, Milind Lakkad, said only 3.4 per cent of the overall staff has been working from offices, but the company is not looking at returning office real estate. He said it will be taking a call on the number of employees working from offices in the next two months after clarity emerges on the vaccine and the general trajectory of the pandemic.
