TCS beats expectations in a seasonally strong period

Digital revenues and client additions are positives

In a seasonally strong June quarter, TCS has exceeded market expectations on its financials and operational parameters. Growth was broad-based across key segments and the company also managed to drive digital revenues at a strong pace. Addition of large-size clients has also been healthy.

During the period, the company’s revenues grew by 1.6 per cent in dollar terms (4.1 per cent in constant currency) sequentially. Net profits expanded by 1.1 per cent. The operating margin continued to be robust, at 25 per cent.

 

 

 

Broad-based growth

All verticals grew for TCS during the June quarter. Key segments such as BFSI (banking financial services and insurance), retail & CPG, life sciences & healthcare and energy & utilities grew at 3.6-5.2 per cent sequentially in constant currency.

Revenues from key geographies, including the Americas(north and south) and Europe increased at a healthy pace.

The growth across verticals and geographies suggests that there has been broad-based client traction for TCS.

In an environment where large deals are hard to come by, the company has managed to add two customers in the $100 million category and five in the $10 million bucket.

TCS’ digital focus also came to the fore during the quarter. The company derives 25 per cent of its revenues from digital offerings. The increase in digital revenues has been a scorching 44.8 per cent in the first quarter of this fiscal compared to the same period last year.

Attrition was reasonable at 10.9 per cent. TCS seems to have justified the huge premium that it commands vis-à-vis peers such as Infosys, Wipro and HCL Technology in the markets.

The company has made the most of a seasonally strong June period and delivered a healthy 10 per cent growth in dollar terms on a YoY basis.

It appears well on course to beat the upper end of trade body Nasscom’s revenue growth projection for the industry of 7-9 per cent in FY19.

For domestic software services players, these numbers kindle hope for a double-digit revenue growth after a couple of fairly weak years for the industry.

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