India’s largest software exporter, Tata Consultancy Services (TCS), has reported a 17.7% increase in its fourth quarter consolidated net profit to ₹8,126 crore, riding on an 18.5% increase in revenue to ₹38,010 crore.
Digital services contributed 31% to revenue, growing at 46.4% over the same period in the previous year.
“This is the strongest revenue growth that we have had in the last 15 quarters,” Rajesh Gopinathan, MD & CEO, TCS
“Our order book is bigger than in the prior three quarters, and the deal pipeline is also robust.
“Despite macro uncertainties ahead, our strong exit positions us very well for the new fiscal,” he said commenting on the performance during the quarter.
The company closed FY19 with 22% growth in yearly profit to ₹31,472 crore and a 19% jump in annual revenues to ₹1,46,463 crore. However, TCS’ operating margins for the fourth quarter contracted by 31 basis points to 25.1% as the software major reported an operating income of ₹9,537 crore.
Asked about the fall in margins and changes in the capital allocation policy, V. Ramakrishnan, CFO, TCS, said,“At this point of time, there are no changes in the capital allocation policy.
“The margins of 26% were not a guidance but our own target and we are close to the lower end. Going forward, on margins, we will stay focused.” The TCS board has recommended a final dividend of ₹18 per equity share.
N Ganapathy Subramaniam, chief operating officer and executive director, said: “It is a very satisfying finish to a year marked by steady growth acceleration and order book expansion every quarter.”
Double digit growth
Revenue growth continued to accelerate in BFSI, crossing over into double digits at 11.6% for the quarter. Growth was broad-based, with most verticals showing strong growth.
“Life sciences and healthcare rose 18.2%, energy and utilities 11.3%, communications and media 10%, retail and CPG 9.9% and manufacturing 9.2%.
Sanjiv Bhasin, executive VP-markets and corporate affairs, IIFL, believes that TCS Q4 results were in line with expectations with a bit of disappointment on the margins’ front.
“The tailwinds of currency, U.S. visas and EU performance have turned out to be headwinds for the IT major. Going forward, we would like to see more colour on how digital and cloud services perform,” Mr. Bhasin told The Hindu.
Geographically, all major markets showed strong growth momentum and surprisingly the growth was led by U.K. with 21.3% growth despite Brexit and Europe with 17.5% growth.
“TCS Q4 revenue came in line with consensus estimates, while EBIT margin missed the estimates. Net profitability came above consensus estimates,” said Paras Bothra, president, equity research, Ashika Stock Broking.
Ajoy Mukherjee, executive VP and global head, human resources, TCS, said, “Variable is 100% for all our employees.
“The average salary hike is 2% for some countries, 4% for some and 6% for some.”
The company has added 29,287 employees during the year on a net basis, taking the total employee strength at the end of FY 19 stood at 424,285 on a consolidated basis.
Ahead of the Q4 number announcement, the shares of the company closed down marginally at ₹2,013.75 on BSE in a stable Mumbai market on Friday.