Sluggish growth in BFSI drags TCS profit in third quarter

CHENNAI: Tata Consultancy Services (TCS) kicked off the IT sector earnings season on Thursday, reporting a 3.6 per cent drop in net profit at Rs 6,531 crore in the third quarter of FY18 compared to Rs 6,778 crore in the year-ago period. The fall — TCS’ third straight dip in quarterly net profit— was due to the continuing slowdown in retail and banking & financial services verticals.

Revenue growth from all segments was above 9.5 per cent, barring retail and the banking, financial services and insurance sector (BFSI). The sluggish growth in the segment was due to low spending by Western BFSI clients, who make up for TCS’ biggest revenue stream. TCS’ BFSI revenue dipped 0.4 per cent.

TCS’ income from operations during the reporting quarter stood at Rs 30,904 crore, up 3.9 per cent from Rs 29,735 crore in the corresponding quarter a year ago. TCS CEO and MD Rajesh Gopinathan said, “We wrapped 2017 with a strong performance in the December quarter... As lagging parts of our portfolio turn around, and areas of softness reduce, we are well placed for stronger growth ahead.”

This quarter, TCS signed its first ever $50 million deal in the digital space. 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 chief operating
officer and executive director N Ganapathy Subramaniam said. The company’s digital revenue saw an increase of about 40 per cent year-on-year and accounted for 22.1 per cent of its revenues.

During the quarter, TCS also saw its IT attrition rate coming down 0.2 per cent sequentially to 11.1 per cent. It added 12,534 employees (gross) in the December 2017 quarter, taking its total headcount to 3,90,880.