TCS fails to impress with a 1.8% rise in Q2 net to Rs8,042 cr

Tata Consultancy Services, India’s leading global IT services, consulting and business solutions provider, reported a consolidated net profit of Rs8,042 crore ($1.13 billion) for the quarter ended 30 September 2019 – an year-on-year increase of 1.8 per cent.

Total revenue for the quarter rose 5.8 per cent to Rs38,977 crore. TCS also saw its operating margins drop to 24 per cent from 26.5 per cent a year earlier.
TCS also declared a total dividend per share of Rs45 per share, including Rs40 as special dividend.
TCS said its digital revenue rose 27.9 per cent year-on-year during the quarter and stood at 33.2 per cent of total. Life sciences and healthcare continued to outperform, with 16 per cent YoY growth while communications and media segment revenues grew 11.8 per cent.
UK and Europe lead growth with 13.3 per cent and 16 per cent, respectively.
TCS said it added the highest ever number of employees with 14,097 new employees during the quarter.
“We ended the quarter with steady growth despite increased volatility in the financial services and retail verticals. We remain confident as the medium and longer term demand for our services continues to be very strong, as evidenced by our Q2 order book – the highest in the last six quarters,” Rajesh Gopinathan, chief executive officer and managing director of TCS, said.
“Digital disruption across multiple industries is making rapid, scalable innovation a critical imperative in the Business 4.0 world. In the auto sector, our scale in advanced engineering R&D skills and depth in digital technologies like AI and IoT are making us the preferred innovation partner to leading OEMs, embedding us deeply into their product R&D value chain. Our strategic partnership with General Motors for their next generation mobility initiatives is a powerful illustration of this,” he added
“Our point of view on anchoring or participating in digital ecosystems, and the Business 4.0 framework, are clearly helping clients in their growth and transformation journeys. We continue to make significant investments in differentiating digital capabilities that are helping us participate in key growth areas of our clients technology spend – be it their cloud transformation, data maturity or in advancing their automation agenda,” N Ganapathy Subramaniam, chief operating officer and executive director, said.
“Our products and platforms are seeing increased client adoption and market coverage. During the quarter, we launched a unified TCS BaNCS Asset Servicing platform for asset managers, broker-dealers and custodians and a comprehensive Site Feasibility Assessment platform within our Advanced Drug Development platform suite. Our diversified industry and geography presence, and largest Agile Ready workforce, together with our Machine First approach to continuous improvement and innovation augurs well for our future growth,” he added.
“We have been gearing up for growth despite the volatility. Our margins in Q2 reflect our continued investments in our people, and in building the capacity we need to fulfill our strong order book,” V Ramakrishnan, chief financial officer, said.
Tata Consultancy Services Ltd reported a lower-than-expected September-quarter profit on Thursday, as India’s No. 1 IT services exporter battled sluggish spending by financial clients.
TCS, which like its peers in India heavily relies on banking clients in the West for revenue, was hurt by dampening of IT spending by financial clients.
The slackening of demand for its products and services can also be blamed on the escalating trade war between the United States and China, as well as Britain’s planned exit from the European Union.
The company - whose clients include the Netherlands-based ABN Amro Bank, Citigroup UK and Norway’s DNB - said revenue in its key banking, financial services and insurance (BFSI) segment rose only 5.3 p[er cent to Rs15,427 crore.
BFSI, the company’s biggest earner, contributed to over a third of its revenue in the last financial year.
TCS has reported consistently outperforming results in the flagging global economy, but had said last quarter that it only expected to “sustain double-digit” growth this fiscal year.