The country’s largest software exporter not only advanced the revenue recovery by a quarter and margin expansion by two quarters, but also raised the bar for the peers who would be declaring numbers in the coming weeks.
ET Intelligence Group: Tata Consultancy Services (TCS) reported a solid second quarter performance on Wednesday evening and while doing so bettered its own expectations that were set after disclosing the June quarter performance. The country’s largest software exporter not only advanced the revenue recovery by a quarter and margin expansion by two quarters, but also raised the bar for the peers who would be declaring numbers in the coming weeks.
ET Intelligence Group: Tata Consultancy Services (TCS) reported a solid second quarter performance on Wednesday evening and while doing so bettered its own expectations that were set after disclosing the June quarter performance. The country’s largest software exporter not only advanced the revenue recovery by a quarter and margin expansion by two quarters, but also raised the bar for the peers who would be declaring numbers in the coming weeks. Earlier in July, after declaring the first (June) quarter numbers, TCS had anticipated revenue growth to resume by the December quarter and margin improvement by the March quarter. In a major surprise, it achieved these goals way ahead of the schedule. Revenue grew by 7.2% sequentially to $5,424 million in the September quarter thereby offsetting the 7.1% drop in the previous quarter when its clients were impacted due to the COVID-19 outbreak. The operating margin (EBIT margin) expanded by nearly 260 basis points to 26.2% excluding the effect of legal provisioning.Major verticals including banking and finance, retail, healthcare and manufacturing as well as major markets of the US and Europe reported a sequential bounce back for the September quarter reflecting a gradual recovery in business activities. The total contract value of new deals at $8.6 billion compared with $6.9 billion in the June quarter and $6.4 billion in the year-ago quarter improves revenue visibility. TCS also fared well on the human resources front as the employee attrition fell to a record low of 8.9% in the September quarter compared with 11.1% in the previous quarter. It added 9,864 employees on a net basis, in time to take advantage of rising technology transformation among clients. The company has also undertaken salary increases from October 1 in a phased manner hinting at the normalcy in operations. The company’s stock has gained a robust 24% since the first quarter results on July 9. Together with the strong financial performance, the latest buyback offer worth Rs 16,000 crore at Rs 3,000 per share compared with the Wednesday’s closing price of Rs 2,737.4 and a dividend of Rs 12 per share will ensure that the stock will remain on investors’ radar.
