With profit up 7.1% at ₹8,727 cr, TCS posts its strongest Q3 in nine years

In a seasonally weak quarter and in the backdrop of the Covid-19 pandemic, Tata Consultancy Services posted its strongest third quarter growth in  nine years and said that it will end  FY22 with a double-digit growth.

Strong revenue

Rajesh Gopinathan, Chief Executive Officer and Managing Director, said: “Growing demand for core transformation services and strong revenue conversion from earlier deals have driven a powerful momentum that helped us overcome seasonal headwinds and post one of our best performances in  the December quarter. We are entering the new year on an optimistic note, our market position stronger than ever before, and our confidence reinforced by the continued strength in our order book and deal pipeline.”

Sequentially, TCS posted  a net profit of ₹8,727 crore in the December-ended quarter, a 16 per cent growth over  the ₹7,504 crore in the September-ended quarter. On a year-on-year basis, profits were higher by 7.1 per cent.

Revenues came in at ₹42,015 crore, a 4.7 per cent increase sequentially  (₹41,049 crore in the September-ended quarter). Year-on-year, revenues were 5.4 per cent higher. For the quarter under review, TCS won contracts worth $6.8 billion, similar to the same period last year.

TCS also announced a third consecutive interim dividend of ₹6 per share, and comes just days after the IT major’s ₹16,000-crore buyback offer.

Board-based performance

The performance of Asia’s largest software exporter was broad-based and every service line grew. Growth was led by ‘Manufacturing’, which grew 7.1 per cent. While the key BFSI segment rose  2 per cent, Life Sciences and Healthcare expanded 5.2 per cent, Communications & Media  5.5 per cent and Retail and CPG 3.1 per cent.

Earnings Before Interest and Tax (EBIT) grew 6.4 per cent sequentially to ₹11,184 crore and margins expanded to 26.6 per cent in the third quarter against 26.2 per cent in the previous quarter, beating analysts expectations.

‘Icing on the cake’

“It is a growth across the board on all parameters and particularly impressed with margins. The icing on the cake is that TCS is confident of attaining double-digit growth in FY22,” said Urmil Shah, Research Analyst and VP, IDBI Capital.

Sanjeev Hota, Head of Research, Sharekhan by BNP Paribas, said that strong all-round performance driven by market share gains, increasing demand for core transformation services and strong revenue conversion from deals won earlier aided TCS.

In the quarter, net cash from operations totalled ₹11,952 crore, which is 137.4 per cent of net profit. In Q3, TCS added 15,721 employees and had a total headcount  of 469,261, with attrition at 7.6 per cent, its lowest ever.

TCS announced its results after market hours and its shares closed at ₹3,120, up 2.9 per cent from the previous close.