Tata Consultancy Services kick started the second quarter earnings with an 8.4 per cent increase in consolidated net profits even as revenues rose for the ninth straight quarter — reflecting a better-than-expected performance buttressed by strong numbers across all geographies and verticals despite adverse global headwinds.
Net profits crossed the Rs 10,000 crore threshold for the first time. It rose to Rs 10,431 crore against Rs 9,624 crore in the same period of the previous year. Analysts were expecting the company to report a net profit anywhere between Rs 10,000-10,300 crore.
In rupee terms, revenues rose to Rs 55,309 crore against Rs 46,867 crore in the same quarter a year ago.
US dollar revenues climbed 8.6 per cent to $6.88 billion from $6.33 billion in the year-ago period.
Operating margins stood at 24 per cent against 23.1 per cent on a sequential basis and 25.6 per cent in the yearago quarter. The order book looked robust at $8.1 billion.
Rajesh Gopinathan, chief executive officer and managing director of TCS, exuded confidence that the company would continue to grow because “we have built our portfolio to be relevant to our customers”.
The top management at the company, however, said they would remain vigilant to the risks arising from the global macroeconomic circumstances that have prompted the Cassandras to make dire forecasts about a looming recession, at least in Europe.
“There is an increasing sense of caution (among customers) during our discussions. But that has not impacted our order pipeline… However, I believe there is space to find opportunities for growth. It will be difficult to say whether we will be insulated, but we will try to stay close to customers and minimise the impact of volatility,” Gopinath told reporters when asked about the prospects for the future.
“It is taking some time to close deals,” admitted chief operating officer N. Ganapathy Subramaniam. Deal wins remained subdued with the largest deal closed in the quarter amounting to well below $500 million.
“Europe is a very uncertain environment,” Gopinathan said. “We will have to wait and see how the winter pans out (there)…if there are production cuts it will roll across multiple industries.”
Employee attrition continues to plague the software industry and TCS wasn’t able to buck the trend. Attrition spiked to 21.5 per cent from 19.7 per cent on a sequential basis. The company reported a net addition of 9,840 employees (lower than the net headcount addition of 20,409 in the preceding quarter) leading to a total headcount of 616,171.
Attrition will take at least four quarters to come down below 20 per cent on an LTM (last 12 months) basis, Milind Lakkad, chief HR officer, said. But in absolute numbers, it will start coming down from the next quarter, he added.
The compensation expectations of experienced professionals have been moderate, Lakkad said, adding that TCS had honoured all the job offers it has made. “Our investments in capacity building and organic talent development have allowed us to substantially grow our business ahead of headcount addition this quarter,” he said.
At its board meeting, the directors of TCS declared a second interim dividend of Rs 8 per share. Ahead of the results, the TCS share closed at Rs 3,121.20, a gain of 1.81 per cent.
