TCS net up 6.7% sequentially; announces pay hike, share buyback
07 October 2020
Tata Consultancy Services (TCS), India's biggest IT services company, today announced a share buyback scheme and salary hike for employees to reward them after the company reported a 6.7 per cent sequential increase in profit amidst the Covid-19 pandemic and a global shutdown of economic activities.
TCS said the salary hike for employees will be effective 1 October. TCS consolidated headcount stood at 453,540 as of 30 September 2020.
TCS said its board has approved a proposal to buy back up to 5,33,33,333 equity shares, being 1.42 per cent of the total paid up equity share capital, at Rs3,000 per equity share for an aggregate amount not exceeding Rs16,000 crore (excluding taxes and related expenses), on proportionate basis under the tender offer route using the stock exchange mechanism, subject to approval of the members by means of a special resolution through a postal ballot.
TCS reported net (after-tax) income of Rs7,475 crore ($1.14 billion) for the fiscal second quarter (July-September 2020-21), up 6.7 per cent from the previous quarter. Net profit for the quarter, however, was down 7.1 per cent compared to the previous year quarter.
Profit was impacted by the provision of Rs1,218 crore in the EPIC Systems Corporation legal case, but adjusted profit growth was strong at 20.3 per cent to Rs8,433 crore (excluding legal claim provisions) led by revenue growth and margin expansion.
"On August 20, 2020, the US Court of Appeals, 7th Circuit, Chicago, returned a verdict on the appeal filed by TCS, reducing the damages award. The Court held that the punitive damages award of $280 million is constitutionally excessive, vacated the punitive damages award and directed the Trial Court to reassess the punitive damages. The Court upheld the compensatory damages award of $140 million," TCS had said earlier.
TCS said its consolidated revenue for the period rose 3 per cent to Rs40,135 crore compared to the previous year quarter. Consolidated revenue from operations for the quarter grew by 4.7 per cent sequentially, while the company recorded a 4.8 per cent QoQ growth in constant currency and 7.2 per cent growth in dollar revenue for the quarter ended September 2020.
Commenting on the Q2 performance, Rajesh Gopinathan, chief executive officer and managing director, said: “Driving accelerated business value realisation of our customers’ digital investments has resulted in broad-based revenue growth. The strong order book, a very robust deal pipeline, and continued market share gains give us confidence for the future.”
“What we are witnessing right now is the start of the first phase of a multi-year technology transformation cycle. In the current phase, enterprises are building a cloud-based foundation that will serve as a resilient, secure and scalable digital core. In subsequent phases, we will see the native capabilities of these platforms being utilised to create innovative new business models and differentiated customer experiences. Our investments in building deep expertise on these platforms, in research and innovation and in industry-specific solutions leveraging our contextual knowledge, position us very strongly to benefit fully from this secular demand driver,” he added.
“Our all-round performance this quarter is a huge endorsement of the increased relevance of our services and solutions to our clients as they pivot from risk mitigation to long-term resilience powered by cloud, digital and simplification of working methods. Clients are partnering us to leverage our thought leadership in SBWS™, Vision 25 x 25™ and Location Independent Agile™ to build a resilient, adaptable and future-proof operating model,” N Ganapathy Subramaniam, chief operating officer and executive director, said.
“Accessibility and Touchless are becoming important attributes for solution design, and our products and platforms continue to gain traction. Besides core systems transformation, our Quartz Blockchain Solution is the choice of a leading bank and a market infrastructure player for inter-bank lending, crypto assets and for enabling real-time settlements,” he added.
“We have always maintained that growth is the best margin lever, and that is very evident in our numbers this quarter. It is very gratifying to see every financial metric precisely where we would like it to be, with a stellar operating margin despite neutral currency, strong cash conversion, and lowest ever DSO. We continue to invest in our people and are doubling down on building newer capabilities to power the next leg of our growth and market share expansion,” V Ramakrishnan, chief financial officer, said.