TCS Profit Falls As Expected In January-March
File photo of Rajesh Gopinathan, chief executive officer of Tata Consultancy Services Ltd. (Photographer: Dhiraj Singh/Bloomberg)

TCS Profit Falls As Expected In January-March


Information technology services provider Tata Consultancy Services Ltd.’s profit fell in the three months ended March even as its cloud and digital services continued to grow amid fears of visa curbs in the U.S.

Asia’s largest software services firm saw its profit fall 2.8 percent sequentially to Rs 6,608 crore in the three months ended March, according to a stock exchange filing. The profit marginally missed Rs 6,654 crore consensus of analyst estimates tracked by Bloomberg, the first time in nine quarters.

With U.S. President Donald Trump expected to sign an executive order to revamp the H-1B visa programme, the company said it will move to a less visa-dependent model for its outsourcing services. The Trump administration wants companies to hire more Americans at higher salaries compared to H-1B visa holders, which could push up costs for Indian outsourcing firms.

A stronger rupee and a decline in key contributing sectors hurt TCS’ revenue, which stood at Rs 29,642 crore in the three months ended March, 0.3 percent lower than in the previous quarter.

The other key highlights were...

  • In dollar terms, the revenue stood at $4,452 million against $4,387 million in the previous three months.
  • TCS saw its revenues decline sequentially across all its verticals except communication, media and tech.
  • The banking and financial services segment, which contributes nearly half of its revenue, declined 1.6 percent, while the retail and consumer business vertical showed a 2.9 percent degrowth.
  • The company’s attrition rate in IT services, the lowest among industry peers, stood at 10.5 percent in the fourth quarter.

The company continued its thrust on digital technologies, which contributed $3 billion revenue in the financial year 2017, growing 29 percent annually.

Our clients are looking for integrated offerings as they advance their cloud agenda and we have a solid pipeline of deals across markets and industries. 
Rajesh Gopinathan, CEO, Tata Consultancy Services

TCS maintained a margin guidance of 26-28 percent for financial year 2017-18. This is a positive since margins are under severe pressure across the industry, according to Mayank Babla of brokerage firm KR Choksey. Companies have been reducing their billing and contract rates to counter competition, he said.

Companies are sacrificing margins at the cost of business.
Mayank Babla, IT Analyst, KR Choksey

Babla said while the decline in revenue from BFSI was a “bit surprising”, it is expected to bounce back in the coming quarters.

TCS Profit Falls As Expected In January-March

The company also plans to reward its shareholders with a final dividend payout of around Rs 5,418 crore at Rs 27.5 per share, it said in a separate filing. This comes after the company’s shareholders on Monday approved a Rs 16,000-crore buyback, the biggest ever in India.

This was the first quarter in nine years for the IT major without N Chandrasekaran at the helm, under whom its market capitalisation grew over three-fold to become the most valuable Indian company. He passed on the reins to Chief Executive Officer Rajesh Gopinathan, the former chief financial officer who was elevated after Chandrasekaran was appointed Tata Sons’ chairman following Cyrus Mistry’s ouster.

Ahead of the earnings, shares of TCS closed 0.53 percent lower, tracking the benchmark S&P BSE Sensex Index which fell 0.3 percent.

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