Tata Consultancy Services, the country’s largest software exporter, on Wednesday reported a 7 per cent year-on-year decline in second-quarter net profit to Rs 7,475 crore on the back of one-time provision towards a legal claim. However, the company saw its revenue rise 3 per cent from a year ago to Rs 40,135 crore and the management signalled a sustainable recovery in the second half of the financial year.
TCS also announced a share buyback of Rs 16,000 crore; it will buyback 5,33,33,333 shares, which is 1.42 per cent of TCS' total paid-up equity share capital at Rs 3,000 per share. It also announced an interim dividend of Rs 12 per equity share. TCS shares closed at Rs 2,737.40, up 0.8 per cent on the BSE on Wednesday.
COVID-19 has hit economies and businesses hard. But, the lockdowns and social distancing norms have also created huge opportunities as companies leverage technology and services such as digital, cloud computing and automation to ride through the pandemic.
Excluding the one-time provision related to the US lawsuit, TCS’ net income rose 5 per cent year-on-year to Rs 8,433 crore.
“Overall (it has been) a very strong quarter from a financial perspective, underlining the demand recovery that we have been speaking about for some time now and setting up us nicely for participating in both the technology transformation and the overall transformation of the business environment that we believe will sweep across multiple industries as we look forward into the medium to long term,” said Rajesh Gopinathan, MD and CEO of TCS.
He said the revenue growth was broad-based; with a 6.2 per cent growth in its core banking, financial services and insurance vertical. Retail and consumer packaged goods verticals, which were among the sectors hit hard by the pandemic in the April-June quarter have also bounced back, with 8.8 per cent sequential quarter growth, added Gopinathan. Meanwhile, life sciences and healthcare continued to report very strong performance with a near 7 per cent quarter-on-quarter growth.
From a geographical perspective, the core market of North America saw a bounceback, with a 3.6 per cent sequential growth, continental Europe saw a 6.1 per cent uptick and India market grew 20 per cent in the September quarter, compared with the June quarter. The Middle East and Africa, Latin America and Asia Pacific markets also reported sequential growth in revenue last quarter.
Gopinathan said that the rebound in this growth across verticals and geographies was a “pleasant surprise” and believes that this recovery has “strong legs.”
“We are in a midst of a sustainable demand recovery when we look at conversations with customers as well as we look at the current and expected pipeline going forward. We were among the earliest to actually call and say we should be able to recover by the third quarter and it is distinctly a pleasure that it has happened a quarter ahead,” he added.
TCS is now more confident on the second half of the year, compared to 3-6 months ago, but, Gopinathan stressed that they were not out of the woods yet and it was necessary to be careful on the economy as well as the health side.
Buoyed perhaps by the strong recovery, TCS said it will roll out salary hikes across employee bands, effective October 1.
The company added 9,864 employees on a net basis, taking its consolidated headcount to 453,540 employees at the end of the quarter. Also, its IT services attrition rate hit an all-time low of 8.9 per cent, it added.
