IT services major Tata Consultancy Services (TCS) on Wednesday reported a 12.3 per cent year-over-year (YoY) growth in net profit to ₹9,769 crore, up from ₹8,701 crore in the same quarter last year, missing market expectations. On a sequential basis, profit grew 1.5 per cent from ₹9,624 crore last quarter.

The company’s revenue from operations grew 16.3 per cent to ₹48,885 crore, compared to ₹42,015 crore during the same quarter last year. Sequentially, it rose 4.3 per cent, up from ₹46,867 crore last quarter. With this, TCS reached the key revenue milestone of $25 billion in annual revenue for the year ended December 2021.

The quarter witnessed strong client addition with 10 new clients added in the $100 million-plus category, taking the total to 58 while 21 new clients were added to the $50 million-plus category, taking the total to 118. Margins declined to 25 per cent compared to 25.6 per cent in the preceding quarter.

Digital transformation

Rajesh Gopinathan, Chief Executive Officer and Managing Director of TCS, said, “It’s been a seasonally weak quarter, but a quarter of significant growth across almost all our key segments, whether it be verticals, our markets, and we are seeing participation on all parts of the customers digital and technology transformation journeys.”

“We have continued to build our capabilities across a wide spectrum, whether it be cloud, whether it be digital analytics, and other areas, and we see continued strong traction across the board,” Gopinathan added.

The attrition rate for the quarter worsened to 15.3 per cent compared to 11.9 per cent in the previous quarter. Attrition was 8.6 per cent in the first quarter. To retain quality talent, TCS promoted 1.1 lakh employees so far this fiscal year and has plans to promote 40,000 more in Q4 FY22.

Milind Lakkad, Chief HR Officer at TCS, said, “We continue to set new records in talent acquisition. In addition to the 43,000 freshers we hired in H1, we on-boarded 34,000 fresh graduates in Q3 – which is higher than our full-year fresher hiring numbers in prior years.”

TCS added 28,238 employees on a net basis, taking the total number of employees to 5,56,986. The company reported that it now has over 2 lakh women employees.

Broad-based growth

All verticals of the company grew in the mid to high teens during the quarter. The growth was led by retail and consumer packaged goods segment which grew 20.4 per cent YoY, followed by BFSI, its largest vertical which grew over 17.9 per cent YoY.

It was followed by the manufacturing vertical which grew 18.3 per cent. Technology and services grew over 17.7 per cent, life sciences and healthcare grew over 16.3 per cent and communications and media grew over 14.4 per cent.

Among major markets, the growth was led by North America, which accounts for 50 per cent of the company’s revenues, grew over 18 per cent YoY while Continental Europe grew over 17.5 per cent. UK grew over 12.7 per cent.

Among emerging markets, growth was led by Latin America (+21.1 per cent) and India (+15.2 per cent), followed by Middle East & Africa (+6.9 per cent) and Asia Pacific (+4.3 per cent).

From a pipeline perspective, the company crossed a total contract value of $7.6 billion this quarter. It saw strong TCV across all segments like North America, BFSI, retail, etc as per Gopinathan.

The overall deal value or its total contract value signed in banking financial services this quarter was over $2 billion. The company is also focused on new-age segments in BFSI including crypto exchanges, crypto clearing settlement, payments, modernization, etc.

“There is significant room for growth, from talent and customer perspectives. And we need to stay focused on it. This is the time to be in this industry. The market is out there and it is up to us to catch it,” Gopinathan said.

Work from home policy

Talking about the company’s work from home policies, N Ganapathy Subramaniam, Chief Operating Officer & Executive Director, TCS said, “We are staying focused on improving our secure borderless workspace model and architecture as well as our 25 by 25 model. We’re staying committed to that. Some of our leadership team have started to attend office and we have given them the flexibility to decide.”

Buyback plan

The company also announced a proposal to buyback up to four crore equity shares of the company for an aggregate amount not exceeding ₹18,000 crore being 1.08 per cent of the total paid-up equity share capital, at ₹4,500 per equity share. This is the largest buyback by the IT services company in the last 5 years. The company has declared a third interim dividend of ₹7 per equity share of ₹1 each.