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TCS Q3 net soars 7%; double-digit growth expected in FY22

Last updated on: January 08, 2021 23:09 IST

The county's largest IT company TCS on Friday reported a 7.2 per cent jump in December quarter net to Rs 8,701 crore on a consolidated basis, and seemed to suggest the worst is behind by projecting double-digit revenue growth for FY22.

Tata Consultancy Services CEO Rajesh Gopinathan

IMAGE: Tata Consultancy Services CEO Rajesh Gopinathan. Photograph: Francis Mascarenhas/Reuters

The company, a cash cow for Tata Sons, saw a 5.4 per cent growth in revenue at Rs 42,015 crore for the quarter.

Operating profit margin came in at 26.6 per cent despite implementing wage hikes, after consistently missing the 26-28 per cent aspirational band for many quarters.

 

Its managing director and chief executive Rajesh Gopinathan told reporters that at the beginning of the fiscal, the company had set itself a target to level-up or exceed on revenues by the December quarter which it has achieved, while on the profit margin front, it has done so one quarter ahead of time.

Stating that TCS is reverting to normal business trajectory after the reverses of the pandemic, Gopinathan said, "In FY22, we are confident of being back on a double-digit growth trajectory.

“More than the visibility on the revenues, we are confident about the sustainability of the trajectory."

He also exuded confidence of ending FY21 with a positive revenue growth, pointing out that the tailwinds created by large deal wins during the year will hold it well in the last quarter of the fiscal as well.

To a question on client budgets in the new year, Gopinathan said it is too early to assess the same but added that performance of the last year gives it confidence.

The company will achieve double-digit revenue growth both in FY22 and also in calendar year 2021, as compared to previous 12 months, he noted.

The company closed the quarter with a total contract value of new deals at $6.8 billion, he told reporters, underlining there was a broad-based improvement in performance across verticals and geographies.

He said revenues grew 4.1 per cent as compared to the preceding September quarter, which is the fastest growth achieved in the last nine quarters.

Its largest vertical of banking, financial services and insurance witnessed 2 per cent improvement on the back of good performance of banks in North America, Gopinathan said, adding that the performance is "definitely sustainable".

Revenues from UK grew 4.5 per cent sequentially, and will be susceptible to the volatilities in the market which will be brought about by the additional lockdowns, he said, and added that healthcare and lifesciences continued to be the fastest growing vertical.

Its chief financial officer V Ramakrishnan said the margin expansion was possible on the back of improved utilisation and productivity.

Currency, which was the factor to watch out for given a 1 per cent appreciation in the rupee, was benign for the company despite the gyrations, he said.

The company will be taking a call on wage hikes, which are generally done in April but had to be deferred to October because of COVID-19, in March, he said.

The company added over 15,700 people on a net basis to take the overall headcount to 4.69 lakh.

The attrition stood at lowest ever rate of 7.6 per cent.

Its chief of human resources Milind Lakkad said only 3.4 per cent of the overall staff has been working from offices while the rest continue to operate from homes, but the company is not looking at returning office real estate.

He said it will be taking a call on the number of employees working from offices in the next two months after clarity emerges on the vaccine and the general trajectory of the pandemic.

Gopinathan said TCS has been participating across the value chain on the vaccine efforts, right from aiding clients in the vaccine discovery process to reconfiguring their supply chains and also developing adverse event reporting capabilities.

Asked about the sustainability of the revenues given the fact that the bulk of the current incremental revenues are coming from the limited duration digital transformation deals, Gopinathan reiterated that revenue growth will be sustainable and the company has a layered model in mind which will be of help.

He attributed the handsome rise in revenues despite the pandemic to the investments done in the past and also its differentiated offering which is helping it emerge as a partner of choice for clients.

Its overall cash at the end of the Decmeber stood at Rs 65,000 crore.

The company board on Friday recommended an interim dividend of Rs 6 per share.

Ramakrishnan said it will continue to pass a bulk of free cash to shareholders, and will be looking for merger and acquisition opportunities more from a capabilities perspective.

Ahead of the announcement of the numbers, the company scrip closed the trading session 2.89 per cent up at Rs 3,120.35 a piece on the BSE as against gains of 1.43 per cent on the benchmark.

Photograph: Francis Mascarenhas/Reuters

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