A pedestrians walks along an underpass near a Tata Consultancy Services Ltd. (TCS) building in the Electronics City area of Bengaluru. (Photographer: Dhiraj Singh/Bloomberg)

Q1 Results: TCS Beats Estimates In June Quarter On North America Rebound And BFSI Recovery

Tata Consultancy Services Ltd.’s profit grew more than estimated as its North America business bounced back and recovery in its banking vertical continued.

Net profit rose 6.3 percent sequentially to Rs 7,340 crore for the quarter ended June, TCS said in its filing with the stock exchanges. The bottom line surpassed the Rs 6,957 crore consensus estimate of analysts tracked by Bloomberg.

  • Revenue rose 6.8 percent quarter-on-quarter to Rs 34,261 crore.
  • Dollar revenue rose 1.6 percent to $5,051 million.
  • Operating profit rose 5.3 percent to Rs 8,578 crore.
  • Operating margin contracted 40 basis points to 25 percent.

India's largest software services provider saw the North America business, that contributes more than half to its total revenue, grow at its fastest in the last three years. The North America business witnessed an extended slump due to slower client spending, a shift towards automation and visa curbs. The rebound was driven by a recovery in its key banking and financial services and retail verticals.

“Our banking vertical recovered very nicely this quarter, while other industry verticals maintained their momentum,” said Chief Executive Officer Rajesh Gopinathan in a media statement. “With a good set of [deal] wins during the quarter, a robust deal pipeline and accelerating digital demand, we are positioned well for the future.”

The recovery in TCS started during the October-December quarter and gained momentum as the company won a few large deals in the January-March period, Urmil Shah, an analyst at IDBI Capital told BloombergQuint.

It [TCS] is well-placed to deliver double-digit growth this year. The performance in this quarter only reiterates that.
Urmil Shah, Analyst, IDBI Capital

The IT giant’s digital transformation also gathered pace as it sought to address changing client needs by catering to newer technologies. Revenue from digital deals, which has grown 45 percent over last year, now accounts for a quarter of its turnover.

“We are seeing strong demand in areas like cloud transformation, cyber-security and data privacy, and automation,” said Chief Operating Officer Ganapathy Subramaniam in the statement. “We continue to stitch together our digital offerings and enhancing the deal size.”

Other Highlights

  • Two new clients added in the $100 million plus band sequentially.
  • 13 clients added in the $5 million plus band.
  • Attrition rate at 10.9 percent.
  • Board declares interim dividend of Rs 4 per share.

The company had only recently announced its second Rs 16,000 crore buyback in two years. Shares of TCS closed 0.56 percent lower ahead of the result announcement. The stock rose 29.7 percent between April and June, compared to a 5.9 percent rise in the benchmark Nifty 50 Index.

Also read: TCS Announces Rs 16,000-Crore Buyback, Again