Tata Consultancy Services, India’s largest software exporters, reported a 24.1% growth in its third quarter net profit to ₹8,105 crore compared to the year-earlier period even as on-site hiring dragged the margins down for the IT bellwether.
Revenue of the IT services major increased 20.8% during the quarter to ₹37,338 crore, the highest in 14 quarters. Digital accounted for 30.1% of the revenue, registering year-on-year growth of 52.7%. TCS’s CEO and MD Rajesh Gopinathan said, “We are wrapping up 2018 with a strong revenue growth of 12.1% in the December quarter, which is the highest in 14 quarters, with continued growth acceleration in key verticals and across all geographies.
“The strong client metrics, industry leading growth in digital services, a very strong order book and deal pipeline are all validations that customers recognise our differentiated capabilities and are picking us for their growth and transformation programmes.”
Operating margins during the quarter fell 90 basis points (bps) over the previous quarter to 25.6% below the guided range of 26-28%.
Rupee volatility
The company’s chief financial officer V. Ramakrishnan said “despite headwinds from the rupee volatility against various currencies, and the higher cost of doing business in some major markets, our operating margins have been resilient.
“We remain focused on driving rigour in our operations, generating strong cash flows and steering profitability back to our preferred range, while continuing to invest strongly for future growth,” he added.
During the quarter, TCS added 6,827 people (net), taking the overall employee strength to 4,17,929 employees.
Attrition rate was at 11.2% in the last 12 months (LTM) basis.
Commenting on the results, Sanjeev Hota, AVP Research, at Sharekhan said, “TCS delivered broadly in line revenue numbers for Q3, however, margins performance missed the mark owing to higher than expected cross currencies headwinds and higher cost of doing business onsite. Digital piece continued to delivered strong performance and BFSI delivered a strong quarter with 8.6% yoy growth. Management has alluded at strong deals momentum and stated at order wins of $5.9 billion for the quarter, while maintaining double digit revenues growth for FY19. We continue to remain positive on TCS among the top tier IT companies.”
“I would rate this quarter growth as tepid in the short term for a strong growth in long term. The cost of manpower was bound to go up due to pressure on local hiring in the US. I expect the current quarter to be better than Q3,” Sanchit Vir Gogia, chief analyst, founder and CEO, Greyhound Research told The Hindu.
The company’s board declared an interim dividend of ₹4 per equity share.
