TCS net at Rs 6,586 cr beats estimates in 'unusual Q2' on margin boost

A 90 bps improvement in margins saved the day for TCS in the 'unusual Q2'

FP Staff October 13, 2016 18:05:02 IST
TCS net at Rs 6,586 cr beats estimates in 'unusual Q2' on margin boost

Tata Consultancy Services (TCS), the country's largest software exporter, on Thursday reported a 4.3 percent on quarter growth in net profit to Rs 6,586 crore boosted by an improvement in margins but said uncertainties in environment had resulted in holdbacks in discretionary spend by customers.

The company's revenue stood at Rs 29,284 crore, almost the same as the previous quarter.

A CNBC-TV18 poll of analysts had estimated the technology major's net profit to fall 0.9 percent to Rs 6,260 crore.

TCS net at Rs 6586 cr beats estimates in unusual Q2 on margin boost


In the year-ago period, the company had posted a net profit of about Rs 6,073 crore and a revenue of Rs 27,165 crore.

Despite the higher-than-estimated net profit, the company's dollar revenue disappointed with just a marginal 0.3 percent increase to $4,374 million. In constant currency terms, revenue rose just 1 percent.

The CNBC-TV18 poll had estimated a 1.8 percent rise in dollar revenue to $4,440 million. In rupee terms, it was seen up 1.5 percent at Rs 29,738 crore on quarter. Constant currency terms, the analysts had expected a 2.5 percent increase in revenue.

However, the company's operating margins came in at a healthy 26 percent as against the expectation of 25.3 percent. In the quarter ago, the margin stood at 25.1 percent and in the year-ago at 27.1 percent.

CEO and MD N Chandrasekaran termed the quarter an ‘unusual Q2’. (Traditionally, July-September is a strong quarter for software companies.)

"Growing uncertainties in the environment is creating caution among customers and resulted in holdbacks in discretionary spending this quarter. In addition, volatility in markets like India and Latin America also muted revenue growth,” he said in a press release.

He said the quarter was "good" from a profitability perspective "where despite multiple headwinds, our disciplined approach and focus on operations have helped us deliver a strong margin performance".

"With technology increasingly at the forefront of business, we are confident that this is temporary... Over 180,000 TCSers are now trained with significant expertise in new digital technologies," he said.

TCS net at Rs 6586 cr beats estimates in unusual Q2 on margin boostDuring the second quarter, growth was led by life sciences and healthcare, which grew 4.7 percent sequentially in constant currency, followed by energy and utilities (up 3.6 percent).

Europe saw strong growth at 3.7 percent and Asia-Pacific at 3.5 percent sequentially in constant currency while North America grew 1.4 percent sequentially and the UK was flat.

India declined by 7.6 percent sequentially while Latin America also continued to show volatility, TCS said.

The company's attrition rate declined to 12.9 percent from 13.6 percent a quarter ago and 16.2 percent a year ago. It added 22,665 employees on a gross basis and 9,440 net employees, taking its total headcount to 3.71 lakh as of 30 September 2016.

During the quarter, shares of TCS had witnessed a 4.8 percent decline on the BSE while the BSE IT index fell 8.7 percent and the Sensex rose 3.2 percent. The stock today declined 2.2 percent from the previous close to Rs 2,328.50.

Data inputs from Kishor Kadam

With PTI

Updated Date:

also read

Decoding IT earnings: TCS is steadily outperforming Infosys

Decoding IT earnings: TCS is steadily outperforming Infosys

Tata Consultancy Services, India's largest software services exporter, once again outshined Infosys with a a stellar second quarter performance driven by strong deals and broad-based growth from almost all industry verticals and geographies.<br /><br />