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TCS says IT cos not yet out of woods; Q2 net profit up 9%

Source: PTI
Last updated on: October 11, 2023 22:49 IST
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The country's largest software exporter TCS on Wednesday reported an 8.7 per cent increase in its September quarter net profit to Rs 11,342 crore, but made it clear that the headwinds for the IT sector continue amid a sluggish economic climate.


Photograph: PTI Photo from the Rediff Archives

The Tata Group company also announced a Rs 17,000-crore share buyback on top of committing a nearly Rs 3,300-crore dividend payout.

Its revenue increased 7.9 per cent in the September quarter to Rs 59,692 crore but was up only marginally compared to Rs 59,381 crore in the preceding June quarter.

"Yes, there is uncertainty because of which clients are focused more on optimisation, which results in the older projects getting optimised or some of them getting passed or reprioritised, resulting in muted or moderated revenue growth," its chief executive and managing director K Krithivasan told reporters in Mumbai.


The company's mainstay of banking, financial services and insurance reported a marginal dip in revenue, and so did communication and media at negative 2.1 per cent.

Among the geographies, the United Kingdom led by growing at double digits, but the biggest market of North America grew by just 0.1 per cent.

Meanwhile, even as it faces choppy waters on the revenue expansion front, the company reported new deal signings of $11.2 billion, the third straight quarter of the number being over $10 billion.

The company management acknowledged the strong deal flows are not getting translated into revenues.

Its chief operating officer N Ganapathy Subramaniam said it completed two projects in the quarter, due to which there was some hit to the revenues, but was quick to add that in all the new projects, the deal ramp-ups are as per plans.

Krithivasan said the new deal pipeline continues to be strong, but they cannot comment if all of it will get translated into signings.

Among the geographies, Krithivasan said, North America is "slightly confusing" with different sets of data inputs influencing the outlook being received, while in Europe, there are "issues" in Germany and France.

The company said the $11.2 billion of new signings in the July-September period include $1 billion contracted by state-owned BSNL for putting up a 4G/5G network and the mega-deal it won from auto major JLR, also a Tata group company.

On the margin front, it reported a 0.25 per cent expansion to 24.3 per cent on the back of benefits from better execution of contracts, curtailing discretionary expenses, while the spending on infrastructure proved to be a drag, its chief financial officer Samir Seksaria said.

He said the 26-28 per cent operating profit margin band continues to be a guiding beacon, but declined to give a target by when it will be able to achieve the number.

The company may resort to strategic bets on compromising margins on select projects, but when looked at from a holistic perspective, the overall aspirations are kept in mind while bidding, he added.

The company is monitoring the situation in Israel, where it has 250 staffers working on projects, but does not expect any major impact because of the situation, Subramaniam said.

Stressing that a lot of the staffers may be local Israelis, Subramaniam said the company is in touch with all the employees, and once the flights restart, will look at requests for evacuation.

The company reported a decline in the overall staff to 608,985 from over 6.15 lakh in the quarter-ago period, and 6.16 lakh in the year-ago period.

Its chief human resources officer Milind Lakkad said the company has not stopped hiring, but the overall new hires are trailing the number of people quitting the company due to which the overall count is down.

Reiterating the non-linear model, Lakkad said one cannot equate business prospects with the number of staff.

Meanwhile, the company said over 1 lakh of its employees are now trained in artificial intelligence skill sets, even though the average contracts on generative AI are worth less than $1 million, the COO said.

TCS has completely discontinued the pandemic practice of allowing people to work from home and asked staff to report to offices all across the week, Lakkad said, adding that the move is driven by a high number of hiring in the last three years and the need to instil company's values.

Meanwhile, when asked about the bribes-for-jobs scandal, Krithivasan said the investigations have been completed and necessary actions taken against errant employees.

He, however, did not quantify the number of employees found to have indulged in wrongdoing.

Lakkad said corrective actions, which it has initiated, include ones on the organisational front, people front and also on the technology front.

Ahead of the results, the company scrip closed 0.52 per cent down at Rs 3,610.20 apiece on the BSE against gains of 0.60 per cent on the benchmark.

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