TCS Q2 results: Net profit drops 7% to Rs 7,475 cr; board approves Rs 16,000 crore in share buyback

NEW DELHI: TCS, the largest IT firm, on Wednesday said its net profit fell 7.05 per cent to Rs 7,475 crore for the September quarter compared with Rs 8,042 crore in the same quarter last year.

An ET NOW survey of analysts had projected a quarterly profit of Rs 8,073 crore for the Tata Group firm.

Alongside its results, TCS said its board has approved a share buyback proposal amounting up to Rs 16,000 crore. With this, TCS has become the first technology company to go for a buyback of its shares in FY21. The company last went for a share buyback in 2018 for the same amount.

The company will buy 5,33,33,333 shares at Rs 3,000 per share, a premium of 9.59 per cent from the last closing price. In terms of size, Wednesday's buyback was 1.55 per cent of the company's total market capitalisation of Rs 10,27,177.79 crore, as of closing value.

The company also approved an interim dividend of Rs 12 per share.

The software exporter said its revenue for the quarter rose to Rs 40,135 crore from Rs 38,977 crore YoY. The company claimed its cash conversion was strong as net cash from operations stood at Rs 10,618 crore, 125.9 per cent of net income.

"Driving accelerated business value realization of our customers' digital investments has resulted in broad-based revenue growth. The strong order book, a very robust deal pipeline, and continued market share gains give us confidence for the future," said Rajesh Gopinathan, Chief Executive Officer and Managing Director at TCS.

Total deals won during the quarter stood at $8.6 billion compared with $6.9 billion in June quarter and $8.9 billion in March quarter.

The company also earmarked Rs 1,218 crore towards a legal claim provision.

"We have always maintained that growth is the best margin lever, and that is very evident in our numbers this quarter. It is very gratifying to see every financial metric precisely where we would like it to be, with a stellar operating margin despite neutral currency, strong cash conversion, and lowest ever DSO,” said V Ramakrishnan, Chief Financial Officer, TCS.

The IT bellwether said, segment wise, BFSI (+6.2 per cent), Retail and CPG (+8.8 per cent) and Life Sciences and Healthcare (+6.9 per cent) led the growth this quarter. Technology & Services grew 3.1 per cent, Manufacturing 1.4 per cent while Communications & Media fell by 2.4 per cent.

“All markets showed good sequential growth, with North America growing 3.6 per cent, UK 3.8 per cent, and Continental Europe 6.1 per cent. Emerging markets also grew well, with India growing 20 per cent, MEA 8 per cent, Latin America 5.5 per cent and Asia Pacific 2.9 per cent,” the company said in a release.

Operating margin of the company expanded 2.2 per cent YoY to 26.2 per cent. Net margin stood at 21 per cent. TCS, unlike peers, does not give yearly revenue guidance.