TCS Q1 Results: Revenue Up, But Profit Falls, Margin Narrows Sequentially
Tata Consultancy Services Ltd.’s revenue rose for the fourth straight quarter on deal wins as clients continued to spend on digital services during the pandemic. India's largest software services provider stuck to its double-digit growth guidance for the ongoing fiscal.
TCS' revenue rose 3.9% over the preceding quarter to Rs 45,411 crore in the three months ended June, according to its exchange filing. That compares with the Rs 45,768-crore consensus estimate of analysts tracked by Bloomberg.
"We did not anticipate the viciousness of the Covid second wave in India. While our resilience model was able to handle the global businesses, some of the businesses in India especially like the BPO and India operations were impacted," Rajesh Gopinathan, managing director and chief executive officer at TCS, said in a post-earnings videoconference. "We lost Rs 350 crore in revenue due to impact of Covid during the quarter. We have seen some stabilisation and recovery by end of June. If Covid situation continues to improve in India, have no doubt we'll bounce back in Q2."
Revenue in dollar terms stood at $6.154 billion.
Revenue in constant currency terms rose 4.2% sequentially across major markets, excluding India and emerging geographies. Including India, the constant currency growth was 2.4 percent.
Q1 Other Highlights (QoQ)
Net profit fell 2.5% to Rs 9,008 crore compared with the forecast of Rs 9,397 crore.
Operating profit fell 1.2% to Rs 11,588 crore.
TCS won new deals worth $8.1 billion. The company bagged deals worth $31 billion in FY21.
Attrition inched up to 8.3%.
Deal wins and client investment towards cloud computing, artificial intelligence and internet of things have helped the Indian IT companies rebound during the pandemic. They had seen costs rise and lost billings as trade stalled when the Covid-19 pandemic struck last year.
The full impact of salary hike was seen in the first quarter for the company. TCS' operating margin narrowed to 25.5% from 26.8% in the preceding quarter.
Wages and salary hikes had a 170-basis-point impact on margin, partially offset by exchange rate gains of around 30 basis points, said Samir Seksaria, chief financial officer, TCS, said. Quite a few discretionary spends returned in the first quarter, he said, and most will be back in the next few quarters. Travel may take some more time.
BFSI, retail and manufacturing were the growth drivers for TCS in the first quarter.
(Corrects an earlier version that misstated the decline in operating profit and the previous-quarter margin)