Bangalore : Tata Consultancy Services Ltd (TCS) reported a 7.4% rise in quarterly profit from a year ago, slightly below analysts’ estimates, as rising employee costs dented earnings, while demand remained strong .
net profit increased 9,926 crore in the quarter ended March 31 9,246 crore a year ago. that behind 10,077 crore consensus profit estimates in Bloomberg survey. Revenue for the March quarter up 15.8% over a year ago 50,591 crore, beating 50,249 crore consensus Bloomberg estimate. For FY22, the revenue was 191,754 crores.
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“The demand environment remains very strong, and the services we have invested in are resonating very well in the market. The technology budget is the last to be squeezed,” said Rajesh Gopinathan, Chief Executive and Managing Director, TCS. There will be a budget.”
Indian IT companies have reported blockbuster earnings during the pandemic as demand for digital and cloud computing services soared. But when they rushed to hire people with the skills needed to deal with the flood of orders, employees had to jump ship and recruit new ones, significantly increasing salary budgets to slash margins.
TCS’ operating margin remained stable at 25% due to supply side constraints. Chief Financial Officer Sameer Seksaria told reporters that while some volatility is expected in the short term, TCS will double up to reach the optimum level of margin on the operating lever in the medium term.
Gopinathan said the company’s new organizational structure, effective April 1, revolves around doubling down on customer focus and ensuring that TCS is relevant to its customers. “The approach is not cost-based, but it is about building ourselves up for opportunities over the long term. It is a logical evolution of the TCS operating model.”
Dollar revenue for the March quarter rose 14.3% to $6.7 billion in constant currency from a year ago on the back of the highest order book of total contract value (TCV) of $11.3 billion. It reported its highest ever incremental revenue growth of $3.5 billion and TCV of $34.6 billion for fiscal 2012.
The company’s earnings validate analysts’ strong growth expectations amid rising demand for digital and cloud transformation initiatives. According to Nasscom’s ‘Tech CEO Survey 2022’, 72% of CXOs expect 2022 to be another growth year driven by digital demand and higher investments in R&D.
The banking, financial services and insurance (BFSI) sector, the largest vertical for TCS, grew 12.9% year-on-year in constant currency and contributed 31.9% to total revenue during the March quarter. The retail and consumer packaged goods (CPG) sector, the second largest vertical, grew 22.1% annually and contributed 15.4% to total revenue during Q4.
“The results of TCS are not very surprising given its track record and strategy over the past few quarters. The company is focusing more on driving agility in organizations by using integrated and agile operations. TCS’s integrated operations and intelligent automation reinforce market differentiation for cognitive business operations (CBOs) where TCS is driving superior operational efficiencies. The organization has to rapidly constructively destroy its existing legacy workload, which may affect its future growth. Furthermore, large enterprise customers continue to be the preferred destination for TCS, each with their own set of advantages and disadvantages,” said DD Mishra, Senior Director Analyst, Gartner.
On a last 12-month basis, the attrition rate increased to 17.4% in the March quarter from 15.3% in the previous three months as demand for skilled technical talent in the industry continues to supply. The company added 35,209 employees during the quarter with a strength of 592,195 for closing FY12. TCS announced its earnings after the close of trading on Monday. Ahead of its results, the stock rose 0.26%. 3,696.40 on BSE.
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