TCS Profit Matches as Asia’s Top IT Firm Recovers From Covid
(Bloomberg) -- Tata Consultancy Services Ltd. reported quarterly profit in line with expectations, bouncing back from a deadly wave of Covid infections that disrupted work in India, its key operations base.
Net income at Asia’s largest software outsourcing provider rose 29% to 96.2 billion rupees ($1.3 billion) in the quarter through September, compared with an average estimate of the same number. Sales climbed 17% to 468.7 billion rupees.
“We’re seeing very broad-based growth and our main U.S. market grew 17.4% and core banking and financial services segment grew 17% year-on-year,” Chief Executive Officer Rajesh Gopinathan said in a press conference after the earnings were announced. He described the pandemic as having provided “a once in a lifetime opportunity” for outsourcers.
India’s top IT firm is among a clutch of software firms that’ve benefited from the pandemic and a subsequent shift toward automation, the cloud and e-commerce. Gopinathan in July reiterated his expectations for a return to double-digit growth in fiscal 2022, though expenses are rising as the internet boom spurs salary hikes for tech talent.
What Bloomberg Intelligence Says
Though we expect demand for emerging technologies to remain strong for the entire industry, it’s possible that Tata’s sales-growth rate over the next 12 months could top rivals due to its industry-low employee-attrition rate. Spending in the retail and health-care verticals appears poised to stay robust, with potential for improvement in banking.
- Anurag Rana, analyst
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The outsourcer is committed to giving employees work-from-anywhere flexibility and will stick to its plan of getting 25% of its workers into offices by 2025, Chief Operating Officer N. Ganapathy Subramaniam said on the same call.
Global rival Accenture Plc last month delivered a better-than-projected profit forecast for the full year. The world’s top IT outsourcing firms have begun to offer services like cybersecurity, automation and machine-learning support for clients, diversifying from traditionally more labor-intensive backroom services. That expansion has inflated the cost of hiring and training employees in those newer technologies, compressing margins. But investors expect top-line growth as post-pandemic shifts quicken IT spending globally.
TCS is the crown jewel of Tata Sons Ltd., the holding company for one of India’s largest conglomerates. Its shares have climbed more than 30% this year, outpacing the benchmark Sensex and in line with closest rival Infosys Ltd., which reports results next week.
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