TCS Q3 Results: Profit Meets Estimates, Margin Rebounds From Nine-Quarter Low
Tata Consultancy Services Ltd.’s third-quarter profit met estimates and its margin rebounded from a nine-quarter low on the back of a weaker rupee and cost efficiencies.
Net profit rose 1 percent sequentially to Rs 8,118 crore in the quarter ended December, according to a filing by the country’s largest information technology firm. Analysts tracked by Bloomberg had pegged the profit at Rs 8,189 crore.
- Revenue rose 2.3 percent quarter-on-quarter to Rs 39,854 crore—in line with the estimate of Rs 39,836 crore.
- Dollar revenue is $5,586 million versus $5,517 million (quarter-on-quarter)
- Operating profit, or earnings before interest and taxes, rose 6.5 percent to Rs 9,974 crore.
- Operating margin expanded 100 basis points to 25 percent.
WATCH | 5 key takeaways from TCS Q3 earnings
TCS’ strategic partnership with Phoenix Group was also expected to aid revenue. The deal, whose value was not disclosed, involves bringing Standard Life’s pensions and savings operations onto Phoenix’s digital platform. The revenue growth is not expected to be “anywhere” near 11.5 percent clocked last year, said Chief Executive Officer Rajesh Gopinath in a press interaction post the earnings release. “We will be quite happy if we clock a [revenue] growth of around 8 percent this year.”
People continue to invest in co-systems transformations and looking at opportunities like a cyrptobank. We also see large digital transmission programmes from clients such as Walgreens. Overall, there is no pains and only gains in BFSI.Ganapathy Subramaniam, Chief Operating Officer, TCS
The company returned around Rs 20,000 crore shareholder capital through interim dividend and final dividend which has resulted in both overall income and, in turn, the profit after tax growing at a slower pace, said Gopinathan.
The revenue was in line with street expectations, said Harit Shah, senior analyst, IndiaNivesh Securities. “The non-banking financial services and insurance and non-retail verticals were the ones that grew at a healthy pace on the yearly basis,” he told BloombergQuint in an interview.
The margin expanded as the rupee depreciated 0.42 percent in the October-December period. A weaker home currency benefits IT firms as they bill a majority of their overseas clients in U.S. dollars. A lot of margin expansion was also due to investments done beforehand in training of talent, Gopinathan said.
Edelweiss had estimated that the rupee depreciation and operational rigour should help expand the company’s margin by 40 basis points sequentially.
TCS Q3 Results: Other Highlights:
- The Tata-Group firm announced an interim dividend of Rs 5 per share and Jan. 25 is fixed as the record date.
- Total Contract Value rose 22 percent year-on-year to $18 billion so far this year.
- Added 20 new clients in BFSI across geographies.
- Crossed 5,000 applied patents; our current patent portfolio stands at 1,200.
Shares of the Mumbai-based company closed 0.8 percent lower ahead of the earnings compared to a flat in the Nifty Index.
WATCH | TCS management replying to BloombergQuint’s questions post Q3 earnings.