Tata Consultancy Services (TCS), India’s largest information technology (IT) firm, posted a 3.6% decline in net profit to ₹6,531 crore crore for the third quarter ended December on the back of rising cost of revenues and weakness in the banking and financial services (BFSI) sector.
In the quarter, revenue grew 3.9% year-on-year to ₹30,904 crore in what is considered a seasonally weak quarter for the IT sector. Cost of revenues, or expenses, grew 5.83% to ₹17,862 crore. The BFSI vertical grew 0.2%, compared with an 8.4% growth in the year-earlier period.
Rajesh Gopinathan, CEO and MD, TCS, said he believed the company was well-placed for stronger growth ahead as ‘the lagging part its portfolio turns around’ and ‘areas of softness reduce’.
‘$50-mn digital deal’
“We wrapped 2017 with a strong performance in the December quarter, marked by the signing of industry-defining deals, robust client metrics and broad-based demand across industry verticals,” said Mr. Gopinathan. We signed our first $50 million-plus deal in digital this quarter, crossing an important milestone in the mainstreaming of digital technologies,” he added. Operating margins for the Mumbai-based IT major expanded 10 basis points to 25.2%. TCS announced an interim dividend of ₹7 per share and this, third interim dividend, would be paid to equity shareholders on January 31.
India’s second-most valued firm by market capitalisation added three clients in $50 million-plus band, 7 in the $20 million-plus range, 9 in the $10 million-plus category and 15 in the $5 million-plus bucket. TCS’ digital revenue saw an increase of about 40% year-on-year and accounted for 22.1% of the company’s revenues, the company said in a statement.
“New deal ramp-ups, increasing traction in digital, robust demand pick up in retail and continuing momentum in most of TCS’ industry verticals gave the company strong volume growth in a seasonally weak quarter,” TCS COO and Executive Director N Ganapathy Subramaniam said.
Total headcount stood at 3,90,880, with gross addition of 12,534 employees and net addition of 1,667 employees. Sanjoy Sen, doctoral research scholar, Aston Business School, U.K. said TCS’ results were neither spectacular nor disastrous.
“Given the recent dropping of the H-1B visa restrictions, which put an end to the scare around inability to extend such visas in-country, I would expect the market to be in a positive mood generally and I expect it to take these results on a mild positive note, with some optimism regarding the months ahead, without too much rise or fall in share prices,” he said.
