TCS Q1 earnings beat estimates, posts record profit; expects strong growth in financial services to continue

Mumbai: India’s biggest software services firm, Tata Consultancy Services Ltd (TCS), expects growth in its banking, financial services, and insurance (BFSI) unit to remain strong in the next one to two years as it posted a record net profit, helped by a rebound in the key division. TCS, headquartered in India’s financial capital of Mumbai, beat street estimates on Tuesday as it reported a net profit of 73.40 billion rupees ($1.07 billion) in the quarter to 30 June compared with 59.45 billion rupees a year earlier. Analysts, on average, had estimated the company would make a profit of 69.83 billion rupees, according to Thomson Reuters data.

“We are quite enthused by the demand that we see (from BFSI clients),” Chief Executive Rajesh Gopinathan told a news conference.

“We’d called it early in terms of the green shoots that we spoke about and they are developing nicely. Where we see, the medium-term outlook (for BFSI) continues to be positive,” he said. TCS Chief Financial Officer V Ramakrishnan told Reuters medium-term meant one to two years. TCS said in April it expected a rebound in spending by its key BFSI clients in North America, its biggest market, in the financial year to 2019. In the first fiscal quarter to June, TCS’s revenue from the BFSI unit, its biggest revenue stream, rose to 134.64 billion rupees from 117.89 billion rupees. At constant currency, the BFSI segment grew 4.1 percent on a year-on-year basis. [caption id=“attachment_4711291” align=“alignleft” width=“380”]  Tata Consultancy Services (TCS) Chief Executive Officer Rajesh Gopinathan[/caption] Tech spending by banking clients was key to the rebound in the BFSI area, Gopinathan said, adding that financial clients were using TCS’s services to improve backend as well as customer experiences in areas such as wealth management. As traditional businesses in sectors such as banking, retail, and hospitality are disrupted globally by nimble start-ups, India’s $154 billion IT industry says it is helping clients transform legacy businesses using digital services. TCS’s revenue from digital services such as cloud, analytics, and big data grew about 44.8 percent in constant currency terms from a year earlier, while overall revenue jumped about 16 percent to 342.61 billion rupees. TCS, the flagship company of Indian conglomerate Tata Group and the only tech firm in the country with a market capitalisation of more than $100 billion, is the first IT services firm to report earnings for the quarter and will set the tone for its rivals such as No. 2 Infosys which reports on Friday.