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TCS Q1 profit falls 6% to Rs 5,945 cr, optimistic about client spend, strong demand from N America

Mumbai: Top Indian software services exporter Tata Consultancy Services (TCS) said on Thursday it was optimistic about client spending on technology even as a cautious global environment and a stronger rupee dented first-quarter profit.

TCS, part of the salt-to-software Tata Sons conglomerate, reported consolidated net profit for the three months to 30 June fell nearly 6 percent from a year earlier to 59.5 billion rupees ($923.2 million).

Analysts on average had expected 61.81 billion rupees.

The country's more than $150 billion software services sector is facing headwinds in its biggest market, the United States, as clients hold back technology spending due to uncertainty over President Donald Trump's order for a review of a visa program for skilled workers.

Indian IT firms use the H-1B visa program to fly in engineers and developers to service US clients.

Adding to the sector's woes, the rupee has appreciated about 5 percent this year against the US dollar, making exports costlier.

TCS was seeing a "strong pipeline" for new deals in the key North American market, especially from smaller customers, Chief Executive Rajesh Gopinathan told a news conference.

In the banking, services and insurance segment, the company was seeing strong demand from the "bottom of the pyramid" as new entrants are coming into the sector, he said.

Rajesh Gopinathan, CEO, Tata Consultancy Services. Reuters

Rajesh Gopinathan, CEO, Tata Consultancy Services. Reuters

"From an overall demand perspective looking forward we see a combination of strong demand for smaller projects coming out of newer areas like digital and some amount of very large transformation deals, especially in the insurance space," said Gopinathan, who took the top job in February.

Chief Financial Officer V. Ramakrishnan said in a statement that the rupee's appreciation against the dollar meant a loss of 6.50 billion rupees in reported revenue.

Revenue for the quarter rose 1 percent from a year earlier to 295.84 billion rupees.

Brokerage Kotak described the TCS first-quarter numbers as weak, adding it expected further cuts to its own and consensus earnings-per-share estimates of the company. The brokerage said in a client note it maintained its "reduce" rating on the stock.

TCS added one client with annual billing of $100 million-plus and one with billing of more than $50 million in the June quarter, TCS said.

It hired a gross 11,202 employees in the quarter. The company has said it will increase hiring in the United States and does not plan to cut its investment there.

Infosys Ltd, the second-biggest Indian software services exporter, is due to report quarterly results on Friday.

Updated Date: Jul 14, 2017 07:18 AM

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