TCS reports 6.3% increase in Q1 net at Rs7,340 cr

Tata Consultancy Services Ltd, the country’s largest information technology company, has reported a 6.3 per cent increase in its fiscal first quarter net profit to Rs7,340 crore, boosted by a rebound of its North America business and continued recovery in its banking vertical.

Revenue for the quarter rose 6.8 per cent quarter-on-quarter to Rs34,261 crore while dollar revenue rose 1.6 per cent to $5,051 million. Operating profit for the April-June 2018-19 quarter rose 5.3 per cent to Rs8,578 crore.
Earnings before interest and tax (EBIT) grew by 5.3 per cent sequentially to Rs8,578 crore but margin contracted 36 basis points to 25.04 per cent due to wage hike. The margin contraction, however, is far better than estimates of around 100 bps, TCS said.
"Disciplined execution, accelerating growth and currency support helped us mitigate the impact of wage increases during the quarter," V Ramakrishnan, CFO, said.
Selling, general and administrative expenses rose 3.6 per cent quarter-on-quarter to Rs5,600 crore in Q1.
Revenue growth accelerated in BFSI (up 4.1 per cent YoY and 3.7 per cent QoQ) and retail and CPG (up 12.7 per cent and 3.6 per cent) in Q1. Growth was led by the energy and utilities vertical (up 30.9 per cent and 5.2 per cent).
Manufacturing business grew by 2.3 per cent QoQ, telecom and media 5.1 per cent, life sciences and healthcare 4.3 per cent, technology and services 2.4 per cent, energy and utilities 5.2 per cent, and regional markets and others 5.9 per cent.
TCS added 2 new clients in the $100 million category and 13 clients in $5 million band during the quarter.
The North America business that contributes more than half to TCS’s total revenue grew at its fastest in the last three years. The North America business had witnessed an extended slump due to slower client spending, a shift towards automation and visa curbs.
The rebound was driven by a recovery in its key banking and financial services and retail verticals.
UK business showed 18.7 per cent rise YoY (8.2 per cent QoQ), Continental Europe 18.6 per cent (5.3 per cent QoQ), and Asia Pacific 10.8 per cent (3.6 per cent QoQ), which all led the overall growth.
Latin America business grew by 2.6 per cent QoQ but India fell 1 per cent and MEA (Middle East and Africa) was down 4.6 per cent.
“Our banking vertical recovered very nicely this quarter, while other industry verticals maintained their momentum,” said CEO Rajesh Gopinathan in a media statement. “With a good set of [deal] wins during the quarter, a robust deal pipeline and accelerating digital demand, we are positioned well for the future.”
Revenue from digital deals, which has grown 45 per cent over last year, now accounts for a quarter of its turnover.
“We are seeing strong demand in areas like cloud transformation, cyber-security and data privacy, and automation,” said COO Ganapathy Subramaniam in the statement. “We continue to stitch together our digital offerings and enhancing the deal size.”
Total employee strength at the end of June quarter crossed the 4 lakh mark and stood at 4,00,875 on a consolidated basis.
"The percentage of women in the workforce rose further to 35.6 per cent, while the total number of nationalities represented grew to 143, TCS said.
The IT services attrition rate (last twelve months) fell further by 0.1 per  cent in Q1 to 10.9 per cent, while the total attrition rate (including BPS) fell to 11.7 per cent.
"We continue with investments in upgrading the technology skills of people, while leveraging their contextual knowledge and domain experience. This has resulted in not only a very nurturing and dynamic work environment, but also a strong digital solutioning capability that delivers differentiated outcomes for our customers," Ajoy Mukherjee, Executive Vice President and Global Head, Human Resources said.
As of 30 June 2018, the company has applied for 3,978 patents, of which 62 applications were made during the quarter, and has been granted 715 patents.
The board of directors of the company have declared an interim dividend of Rs4 per share. The interim dividend will be paid to the equity shareholders of the company on 25 July 2018.
TCS had only recently announced its second Rs16,000-crore buyback in two years. Shares of TCS closed 0.56 per cent lower ahead of the result announcement. The stock rose 29.7 per cent between April and June, compared to a 5.9 per cent rise in the benchmark Nifty 50 Index.