TCS Q3 net up 10.9% at Rs6,778 cr buoyed by digital revenues

Tata Consultancy Services Ltd, India's leading software services and consulting company, has reported a net profit of Rs6,778 crore (nearly $1 billion) for fiscal third quarter ended 31 December – a 10.9 per cent increase from the comparable quarter of the previous fiscal.

TCS had reported a net profit of Rs6,110 crore for the comparable quarter of the previous financial year (Sep-Dec 2015-16).

Revenue rose 8.7 per cent from a year earlier to Rs29,735 crore ($4.39 billion), bolstered by rising revenue from digital services, which comprised 16.8 per cent of its total revenues, TCS said.

Profit rose 2.9 per cent quarter-on-quarter while revenue was up 1.5 per cent from the previous quarter.

TCS' margins remained stable at 26 per cent. On a constant currency basis, revenue grew 2 per cent and volumes recorded 1 per cent rise quarter on quarter.

Traditionally, the third quarter or the December quarter is a weak quarter for Indian IT companies because of more number of holidays in its key overseas markets.

Commenting on Q3 performance, CEO and MD, N Chandrasekaran, said, "The resilience of our business model and strength of our operating strategy has been brought to the fore by our performance in Q3, traditionally a quarter of weak demand. Our strengths in digital, platforms and cloud as well as our deep knowledge of the customers' domain are driving our ability to play a strategic role and make a holistic impact on the business."

TCS said its total employee strength stood at 378,497, including gross addition of 18,362 employees, while attrition was down further quarter-over-quarter at 11.3 per cent in IT services

During the quarter, TCS added two clients in the $50 million + revenue band and five in the $10 million + revenue band.

''To support and sustain our Digital business that is growing at 30 per cent on an annual basis, we continue to build new capabilities in digital technologies, empower employees to enhance agility in the workplace and invest more to develop IP-based platforms and products. Some of these products and platforms are maturing with greater customer adoption while others continue to be incubated in our Innovation labs. As digital adoption increases in 2017, we are well prepared to lead this change,'' Chandrasekaran added.

Rajesh Gopinathan, chief financial officer, TCS, said: ''We have shown great discipline and control at all levels to deliver another credible quarter. Alongside a good growth performance, we have been able to keep profitability stable in our desired range and deliver over $1 billion in free cash flow during the quarter.''

During Q3, TCS said, growth was led by energy and utilities (up 5.8 per cent sequentially), hi-tech (up 2.6 per cent sequentially), banking, financial services and insurance (up 2.1 per cent sequentially), manufacturing (up 2.1 per cent sequentially) and retail (up 1.9 per cent sequentially) in constant currency.

From a geography perspective, emerging markets like Latin America and India clocked double digit growth of 12.5 per cent and 10.3 per cent, respectively, on a sequential basis while North America grew 2.2 per cent sequentially and UK grew 1.7 per cent sequentially.

From a services perspective, strength in growing segments like platforms, cloud and internet of things is evident from the growth in asset leveraged solutions (up 21 per cent sequentially), infrastructure services (up 9.5 per cent sequentially) and engineering and industrial services  (up 3.1 per cent sequentially).