TCS Q3 net up 1.3% at Rs6,531 cr; revenue rises 3.9% to Rs30,904 cr

Tata Consultancy Services (TCS), the country's largest IT software exporter, has reported a 1.3 per cent increase in its net profit for the October-December 2017-18 quarter, at Rs6,531 crore ($1.01 billion), on a 3.9-per cent increase in revenues to Rs30,904 crore ($4.79 billion).

In constant currency terms, however, revenue rose 1.3 per cent, which is less than the 1.7 per cent improvement reported in the previous quarter, but largely in line with expectations for a tame quarter. Revenue grew 6.2-per cent year-on-year in constant currency terms.

Volume growth was 1.6 per cent quarter on quarter – the strongest for this quarter in three years - indicating that there was pricing pressure given that the constant currency revenue growth was only 1.3 per cent.

Earnings before interest and taxes (EBIT) improved to Rs8,645 crore from Rs8,472 crore in the preceding quarter, but was down from Rs8,918 crore in the year-ago period.

In the October-December quarter, operating margin improved to 25.2 per cent. Last quarter, TCS had reported an improvement in operating margin by 170 basis points sequentially to 25.1 per cent.

The retail and consumer products vertical showed a strong turn around, growing 6.4 per cent quarter on quarter while most industry verticals grew above company average in the quarter.

Digital revenue, which formed 22.1 per cent of total revenue for the quarter, was up 39.6 per cent year-on-year and up 13.9 per cent quarter-on-quarter.

During the quarter, TCS added 3 clients in the $50 million + band, 7 in the $20 million + band, 9 in the $10 million + band and 15 in the $5 million + band.

TCS said IT attrition rate (LTM) was down further by 0.2 per cent quarter-on-quarter to 11.1 per cent

Total employees stood at 390,880 with gross addition of 12,534 employees.

''We wrapped 2017 with a strong performance in the December quarter, marked by the signing of industry-defining deals, robust client metrics and broad-based demand across industry verticals. As lagging parts of our portfolio turnaround, and areas of softness reduce, we are well placed for stronger growth ahead,'' Rajesh Gopinathan, CEO and MD, TCS, said.

''Progressive organisations looking to take advantage of new opportunities in the Business 4.0 era are ramping up their Digital investments, and TCS has emerged as their preferred transformational partner. We signed our first $50mn+ deal in Digital this quarter, crossing an important milestone in the mainstreaming of Digital technologies. The investments we have been making over the last few years in Research and Innovation, and in building intellectual property, are giving us a distinct edge in the market in winning such large transformational programs,'' he added.

''We had a very good quarter marked by excellent operating metrics all across. New deal ramp-ups, increasing traction in Digital, robust demand pick up in Retail and continuing momentum in most of our industry verticals gave us strong volume growth in a seasonally weak quarter. Our reputation for superior execution, combined with our platform capability, positions us well to close mega deals,'' N Ganapathy Subramaniam, chief operating officer and executive director, TCS, said.

''Concerted efforts by all our teams and tighter working capital management resulted in very strong cash conversion this quarter. The long view we have historically taken with many of our key investment decisions, be it our geographic forays or new cloud-based platform businesses, is now beginning to yield results. Several of the key deals we signed this quarter, are a vindication of that strategic patience,'' added V Ramakrishnan, chief financial officer, TCS.