TCS Q2 net down 2% at Rs6,446 cr, revenues up 8.4% at Rs30,541 cr

Tata Consultancy Services (TCS), the country's top information technology services provider,  on Thursday reported a net profit of Rs6,446 crore for fiscal second quarter ended 30 September, down 2.16 per cent year-on-year, even as revenues of the company grew 4.3 per cent to Rs30,541 crore.

TCS had reported a net profit of Rs6,586 crore on revenues of Rs29,284 crore in the similar quarter of the previous fiscal.

TCS, however, said its net profit rose 8.4 per cent on a sequential basis while revenues increased 3.2 per cent. The company had reported a net profit at Rs5,945 crore for the April-June quarter.

The company also announced dividend of Rs7 per share.

The Tata group company said its revenues were bolstered by improved business from clients. Business volume increased as it won 47 clients.

During the quarter, the company gained new customers, including an engagement with British insurer Lloyd's, to provide policy administration for over 4 million clients using its platform. Digital business grew 31 per cent and now contribute 19.7 per cent of the company's revenues.

Operating profit margins improved by 1.7 percentage points to 25.1 per cent, due to currency gains and better efficiency across the organisation.

"We experienced robust volume growth in Q2, driven by good demand across multiple industry verticals... Large deal wins this quarter, a good pipeline, and bottoming out of the retail sector softness positions us well," TCS CEO and MD Rajesh Gopinathan said.

''The overall sense we are getting (after meeting customers) is return to optimism. It is measured and people are looking to leverage multiple technologies for transition to business 4.0,'' Gopinathan said.

He added that the company continues to gain share in the fast growing 'digital spend' of its customers.

"Our investment programme remains geared for growth. Continued investments in digital design and transformational capabilities are paying off, and it shows in the strong growth in our Digital business," TCS CFO V Ramakrishnan said.

During the quarter, TCS saw its IT attrition rate (LTM) come down by 0.3 per cent sequentially to 11.3 per cent. It added 15,868 employees (gross) and 3,404 people (net) in the September 2017 quarter, taking its total headcount to 3,89,213 people.

The company recruited 3,725 employees outside India, bringing the total to 6,979 in the first half of the fiscal year.

The first large Indian information technology (IT) service provider to declare quarterly numbers, TCS expects business to grow across sectors, while awaiting recovery in investments from clients in banking and financial services and retail later this year.

Smaller rival Wipro will announce quarterly numbers on 17 October, while Infosys, the country's second-largest IT services company, will declare its quarterly results on 24 October.

TCS said it was taking away contracts from competition, as deal renewals increase for the first time in six quarters.

While outsourcing for legacy services grew marginally by 1.4 per cent, nearly 44 per cent of the global contracts were in digital or deals that had vendors deliver product or solutions as a service.

TCS said it won one client with $100 million, while six clients each in the band of $50 million, $20 million, and $10 million. The firm said it saw attrition reduce to 11.3 per cent, as it focused on training its resources in emerging technologies and digital, which has helped it grow its business in the newer domains. At least 30,000 employees have been re-skilled over the past quarter.

European business grew 5.3 per cent over the quarter, while Latin America grew 5.7 per cent. The US, its largest market saw growth of 1.4 per cent, as it saw continued softness in business from banking and retail customers. The travel and hospitality and energy and utilities drove higher growth than other verticals for the company.

''Our client-centricity and business depth are resulting in industry-leading customer satisfaction levels and strong client metrics. With the sectoral headwinds slowly abating, we expect steadier and stronger growth ahead,'' said N Ganapathy Subramanian, chief operating officer at TCS.

Gopinathan said the firm expects growth to return in both banking and retail sectors as traditional firms overcome fears regarding disruption from fintech startups and online commerce companies.