Info-tech

TCS third-quarter net flat at ₹8,118 cr as BFSI, retail drag

Our Bureau Mumbai | Updated on January 17, 2020 Published on January 17, 2020

Rajesh Gopinathan, CEO and MD, Tata Consultancy Services, at a media briefing to announce the financial results, in Mumbai.

Will be happy with 8% growth in FY20: CEO

India’s largest IT services firm TCS reported a flat growth in profit for the third quarter ended December 31, 2019 at ₹8,118 crore compared with ₹8,105 crore last year, as key sectors, including BFSI and retail, face headwinds.

Revenues for the Mumbai-headquartered firm stood at ₹39,854 crore for the quarter, up 6.7 per cent from the corresponding period last year and a mere 0.3 per cent higher than in the second quarter.

TCS said the second consecutive weak quarter will impact its ambition of 10 per cent annual growth for FY2020.

“We won’t be anywhere around last year’s 11.4 per cent growth after two weak quarters. I’ll be happy with achieving even 8 per cent growth,” said CEO Rajesh Gopinathan.

For the first time, TCS has also decided not to report digital revenues, even though last year the company indicated that it’ll spell out individual numbers within the digital revenue to show growth in areas such as cloud, analytics and blockchain. The worst hit in the quarter was the BFSI segment, which grew even slower in the company’s largest market — North America. The company said there are structural challenges in BFSI not just in North America but even the UK.

Overall, BFSI grew 5.3 per cent in the quarter, while overall North America revenues rose just 4.1 per cent. North America accounts for more than half of the company’s overall revenues.

With 15.9 per cent expansion, highest growth came in from Continental Europe.

“BFSI was a complex story. While there have been no budget cuts at our clients, they want more with less and want to optimise their operations. We continued to gain market share in BFSI and won 20 deals in the quarter,” Gopinathan said.

Overall, TCS signed contracts worth $6 billion in the quarter, taking the overall TCV for the first nine months of the financial year to $18 billion, up 22 per cent from the previous year.

TCS managed to improve its operating margins to 25 per cent in the quarter, up 100 basis points from the sequential quarter, but still 100 basis points shy of its target margin band of 26-28 per cent.

“Our ability to expand our margins in a volatile environment speaks of the strength of our business model, strong execution focus and the higher quality revenues we are getting on account of our strong positioning in our customers’ growth and transformational spends,” said Chief Financial Officer V Ramakrishnan.

TCS managed to get two additional clients in the $100 million + category, taking the overall number to 47 in the quarter.

On NCLAT order

Commenting on the NCLAT order that asked for the reinstatement of Cyrus Mistry as the Chairman of Tata Sons as well as of TCS, Gopinathan said it will have no impact on the company as TCS has already appealed against the order in the Supreme Court.

TCS saw a net addition of 22,390 employees in the first nine months of the financial year, taking the overall headcount to 4,46,675 at the end of third quarter.

 

 

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Published on January 17, 2020
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