India's biggest outsourcer TCS announced its June quarter (Q1) earnings after market hours today. TCS reported net profit of Rs 5,945 crore in June quarter, down 10% from Rs 6,608 crore posted in March quarter. Earnings of TCS assumes significance as the $150 billion Indian IT sector is facing challenges in the business environment and stricter work permit regime in countries like the US, Singapore, Australia and New Zealand.
Here are the key highlights:
TCS' global HR Head Ajoy Mukherjee said: "We continue to hire talent across markets and help TCSers gain new digital skills so that they can participate successfully in digital economy."
TCS said that its total employee strength at the end of June quarter was 3.85 lakh with gross addition of 11,202 and net addition of 1,414 during the quarter.
"Revenue from Digital in Q1 has increased to 18.9%", says TCS CEO Rajesh Gopinathan.
"Q1 hiring: 11,202 and attrition is down to 11.6 % for IT services", says TCS CEO Rajesh Gopinathan.
"In BFSI we're seeing a strong demand from the bottom of the pyramid, as new entrants are coming into the sector," says TCS CEO Rajesh Gopinathan.
TCS operating margin fell to 23.4 per cent in June quarter from 25.7 per cent in March quarter.
Over 82 per cent of TCS' revenues came from major markets like Americas, UK, Europe, and Australia, where our business has a fair share of annuity-based revenues and therefore less volatile. Our revenues from rest of the world or businesses tend to be more volatile on account of their project-centric nature, TCS said in a press release.
In dollar terms, TCS reported a revenue of $4,591 million, up 3.1 per cent sequentially.
Commenting on the Q1 performance, CEO and MD, Rajesh Gopinathan said: "We have seen steady growth across industries in Q1. Robust volumes from major markets driven by good client additions across revenue bands and accelerating Digital adoption from customers have given us the right start to the year."
Commenting upon the Q1 earnings, V. Ramakrishnan, chief financial officer, said: "During the quarter high currency volatility including sharp rupee appreciation against the dollar resulted in Rs 650 crore loss in reported revenues. We remain disciplined in our financial management, stay focused on generating strong cash flows and invest in our digital business. Despite the impact of wage hike in Q1, we continue to drive profitability to our targeted range."
The board of directors of TCS has announced an interim dividend of Rs 7 per share to its shareholder.
Total income from operation for TCS stood at Rs 29,584 crore compared with Rs 29,642 crore in the March quarter, down 0.19%.
TCS reports net profit of Rs 5,945 crore in June quarter, down 10 per cent from Rs 6,608 crore posted in March quarter.
Including today's gain, TCS shares have so far gained 3.41 per cent this year compared with 20.32 per cent surge in the Sensex.
TCS shares closed 0.28% higher at Rs 2,446.40 compared to 0.73% gain in the broader Sensex.
Global IT research firm Gartner today lowered its 2017 IT spending growth estimate further to 2.4 per cent from the 2.7 per cent earlier on worries on digitisation. The firm had first predicted for a 3 per cent growth in worldwide IT spends, which got revised down to 2.7 per cent in January this year.
"Increasing protectionist measures (increasing cost of doing business) coupled with pockets of weakness in some industry verticals and appreciation of the rupee (especially against USD) will dampen the earnings performance of IT companies in the near to medium term," the brokerage said.
Domestic brokerage Sharekhan expects TCS to report a net profit of Rs 6,219 crore on revenues of Rs 29,664 crore for the June quarter. The brokerage has a "hold" rating on the TCS.
According to domestic brokerage Edelweiss Securities, here are the five things that need to be closely watched in TCS Q1 earnings: 1) revenue growth traction of digital services; 2) management commentaries on clients budgets; 3) growth in key verticals such as BFSI, manufacturing, retail, healthcare, etc; 4) pace of local hiring due to expected changes in visa regime; and 5) pace of commoditisation of legacy business and impact of same on demand outlook.
TCS shares have underperformed the broader markets this year. Its shares have risen nearly 3 per cent in this year so far compared to over 19 per cent gain in the broader Sensex.
TCS had reported a net profit of Rs 6,608 crore on revenues of Rs 29,642 crore in the January-March quarter. In dollar terms, TCS' revenue grew 1.5 per cent sequentially to $ 4,452 million. However, in constant currency terms it registered 1 per cent quarter-on-quarter growth in Q4 of last fiscal..
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