TCS Q2 net profit climbs 8.4% to ₹10,431 crore on ‘sustained demand across markets’

Revenue expands 18% to ₹55,309 crore

October 10, 2022 09:09 pm | Updated October 11, 2022 12:57 am IST - Mumbai

Our order book is holding up well, with a healthy mix of growth and transformation initiatives, cloud migration and outsourcing engagements, says TCS CEO & MD Rajesh Gopinathan. File

Our order book is holding up well, with a healthy mix of growth and transformation initiatives, cloud migration and outsourcing engagements, says TCS CEO & MD Rajesh Gopinathan. File | Photo Credit: AFP

Tata Consultancy Services (TCS) Ltd. on Monday said consolidated net profit for the quarter ended September 30 rose 8.4% to ₹10,431 crore from a year earlier. This is for the first time that the quarterly net profit crossed ₹10,000-crore mark. Net margin was 18.9%, the company said.

Revenue grew 18% to ₹55,309 crore. Constant-currency revenue growth was 15.4%. 

The company’s board announced a dividend of ₹8 per share. With a net headcount addition of 9,840 during the quarter, the company’s workforce stood at at 6,16,171.

“We closed the quarter on a strong note,” Rajesh Gopinathan, CEO and MD, TCS, told the media press. “Demand for our services continues to be very strong. We registered strong, profitable growth across all our industry verticals and in all our major markets,” he added.

“This was the milestone quarter for us as we crossed ₹10,000 crore in net profit. On the financial perspective it was a satisfying quarter,” he added.

Challenges lie ahead

However, he said, “Of course, the environment is challenging and it requires all of us to remain vigilant and we once again demonstrated that our services portfolio and focus on innovation and cost optimisation are very relevant as the clients deal with the volatility and challenges,” he added.  

“Our order book is holding up well, with a healthy mix of growth and transformation initiatives, cloud migration and outsourcing engagements,” he further said. 

Mitul Shah, head of research, Reliance Securities said: “We believe that IT services would not remain immune to worsening global macros in terms of rising inflation, economic slowdown, currency headwinds and likely cut on spending.”

“Revenue growth would taper down to low double digit in FY24, while QoQ decline in order book, clear lower employee addition, higher attrition and lower pricing power ahead would lead to valuation multiple contraction close to its historical averages”Mitul ShahHead of research, Reliance Securities

“Revenue growth would taper down to low double digit in FY24E, while QoQ decline in order book, clear lower employee addition, higher attrition and lower pricing power ahead would lead to valuation multiple contraction close to its historical averages. Therefore, at present we have a ‘sell’ rating on TCS,” he added.

TCS COO and ED N. Ganapathy Subramaniamsaid: “Our delivery leadership congregated during the quarter and we are raising the bar further on execution excellence with frameworks like Rigor in Transformation. We are pleased that our office facilities are becoming once again the place of buzz with more and more of our employees and clients celebrating togetherness to realise their full potential.”

Growth in the quarter was led by the Retail and CPG vertical (22.9%), Communications & Media (18.7%), and Technology & Services (15.9%). Manufacturing as well as Life Sciences & Healthcare verticals grew 14.5%, while BFSI climbed 13.1%.

Among major markets, North America led with 17.6% growth; Continental Europe rose 14.1% and the U.K. climbed 14.8%.

In emerging markets, India grew 16.7%, Latin America rose 19%, Middle East & Africa expanded 8.2% and while Asia-Pacific increased 7%. TCS had set up its Latin American operations 20 years ago and this market has crossed $1 billion in revenue, the company said.

​There was strong, broad-based growth for all services in Q2, led by Cloud, Enterprise Application Services, and Cyber Security, the company added.

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