TCS Expects Revenue To Contract In FY21 On Covid-19 Disruption

Tata Consultancy Services Ltd. expects its revenue to decline in the ongoing financial year after the Covid-19 pandemic brought the global economic machinery to a grinding halt.

“We expect the peak impact of the virus outbreak in the next quarter,” TCS’ Chief Executive Officer Rajesh Gopinathan said in a post-earnings media conference. “We expect to see a return to normalcy in financial performance in Q3FY21.”

While TCS’ profit in the March quarter of FY20 met analyst estimates, revenue was flat as India’s largest software services exporter saw business disruptions in the last two weeks of March due to lockdowns across countries.

“The pandemic completely reversed the positive momentum that we had started seeing in some of our biggest verticals in the first half of the quarter,” Gopinathan said.

Besides, clients are anxious about the economic uncertainty stemming from the crisis and may reduce spending, TCS said. “We’re going to see a contraction in terms of demand in the near term.” V Ramakrishnan, chief financial officer of TCS, said. “We cannot predict how demand will pan out in the short term.”

The impact of the Covid-19 pandemic for the company will be similar to the global financial crisis of 2008 in percentage terms, TCS said.

Still, the company said that its long-term profitability target of keeping margin between 24-26 percent is “unshaken”. Promotions will continue while the company has decided not to dole out salary increments as of now. The company also expects adoption of digital technologies by clients to increase once the pandemic is over.

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