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earnings | IST

TCS Q2 Results: Net profit up 6.8% QoQ at Rs 9,624 crore, misses Street estimates

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Tata Consultancy Services (TCS) kicked off the corporate earnings season by posting a net profit of Rs 9,624 crore over revenue of Rs 46,867 crore for Q2, missing Street estimates.

Tata Consultancy Services (TCS) -- the country's largest IT company -- on Friday reported a net profit of Rs 9,624 crore for the quarter ended September 30, missing Street estimates. That marked growth of 6.8 percent compared with the previous quarter.
The IT bellwether posted revenue of Rs 46,867 crore for the July-September period, up 3.2 percent on a quarter-on-quarter basis.
Analysts in a CNBC-TV18 poll had predicted the company to report a quarterly profit of Rs 9,731 crore over revenue of Rs 47,466 crore.
In dollar terms, revenue stood at $6,333 million in Q2 -- up 2.9 percent sequentially.
Revenue from the banking, financial services and insurance (BFSI) segment grew 1.6 percent QoQ to Rs 18,445 crore. Revenue from manufacturing increased 3.2 percent to Rs 4,538 crore, according to a regulatory filing.
On a year-on-year basis, TCS said sales rose 15.5 percent in constant currency terms. All verticals registered growth of more than 15 percent, it said.
“The strong and sustained demand environment is a once-in-a-decade opportunity to position ourselves as the preferred growth and transformation partner for our customers," said Rajesh Gopinathan, CEO and Managing Director, TCS.
"We are using the growth tailwind to invest in strengthening relevant capabilities and building out a comprehensive portfolio of offerings that caters to a broader set of stakeholders in the enterprise across business cycles, strengthening our brand, and making our business more resilient. We believe this is the most sustainable pathway to create longer-term value for all our stakeholders,” Gopinathan added.
Its earnings before interest and taxes (EBIT) rose to Rs 12,000 crore in the July-September period from Rs 11,588 crore in the previous quarter.
Tata Consultancy Services' net income margin came in at 20.5 percent in Q2. Its operating margin -- or EBITDA margin -- was at 25.6 percent, as against 25.5 percent in the previous quarter. The operating margin expansion came despite higher expenses, increased currency headwinds and higher sub-contractor usage, TCS said.
The CNBC-TV18 poll had pegged the company's EBIT at Rs 12,364 crore, and margin at 26.05 percent.
“Strong growth and disciplined execution helped us overcome headwinds from currency and supply-side inflation and deliver expanded margins. Our industry-leading profitability and strong cash conversion give us the wherewithal to make the right investments needed to build out the business of the future," said Tata Consultancy Services CFO Samir Seksaria.
TCS saw strong client addition during the quarter under review. It add five new clients in the $100 million-plus category, taking the total count to 54. It also won 17 new clients in the $50 million-plus category.
TCS saw net addition of 19,690 in its headcount in the quarter, taking its total employee base to 528,748 as of September 30. The company said its IT services attrition rate (on a trailing basis) of 11.9 percent was the lowest in the industry. (Key highlights)
Dividend
The company's board declared a second interim dividend of Rs  7 per equity share. It set October 19 as the record date and November 3 as the payment date.
Reappointment of CEO
The board gave nod to the reappointment Gopinathan as MD and CEO for five years.
TCS shares have rewarded investors with a return of 69 percent in the past one year.
TCS shares had ended 1.1 percent higher at Rs 3,935.3 apiece on BSE ahead of the earnings announcement. The stock has given a return of 69 percent in the past one year.