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TCS posts 12.9% year-on-year profit growth in Q1

IT major announces interim dividend of Rs 5.50 per equity share

Debojyoti Ghosh
Published: Jul 9, 2015 06:32:54 PM IST
Updated: Jul 9, 2015 07:01:47 PM IST
TCS posts 12.9% year-on-year profit growth in Q1
Image: Vikas Khot
N Chandrasekaran, MD & CEO, TCS

Kick-starting the IT earnings season for the April-June quarter on a positive note, India’s largest software-services exporter, Tata Consultancy Services (TCS) on Thursday posted a 12.9 percent year-on-year rise in profit during the first quarter of the current fiscal backed by robust outsourcing demand in its core markets such as North America and Europe.

The Mumbai-headquartered IT firm recorded a net profit of Rs 5,709 crore during the April-June period compared to Rs 5,058 crore during the same time last year. However, on a sequential basis, the company’s net profit can’t be compared because in the January to March quarter, TCS had to factor in a one-time bonus payout of Rs 2,628 crore. Revenue during the June quarter stood at Rs 25,668 crore, up by 16.1 percent year-on-year (y-o-y) and six percent sequentially.  

In dollar terms, revenue grew by 9.3 percent year-on-year to $4.04 billion while profit was recorded at $898 million up 6.2 percent (y-o-y). The April-June stretch is a seasonally strong quarter for the software industry as client budget for IT spends starts rolling out.

“Demand from our core markets like North America and greater traction for digital solutions in key verticals like financial services, retail and life-sciences have driven volumes and growth in Q1. Our significant investments in IP and platforms, digital capabilities and our execution track record gives us a firm foundation to capture growth in the current financial year,” N Chandrasekaran, CEO and managing director, TCS, said in a statement.

“Given the strong pipeline and market adoption of digital across industries, we are investing to train over 100,000 professionals this year in all relevant technologies,” he added. Mumbai-headquartered TCS posted a volume growth of 4.8 percent during the June quarter while operating margin stood at 26.3 percent.

“Our disciplined approach to all aspects of operations have helped maintain operating margins within our stated range despite hedging volatility and the impact of our annual cycle of salary hikes and promotions. We continue to focus on optimising our cash conversion ratios and investing in people and technologies ahead of our business needs,” said Rajesh Gopinathan, chief financial officer, TCS.

During the first quarter of FY16, TCS posted incremental revenues of $136 million driven by strong growth across core markets led by North America, UK, Europe, MEA and Asia-Pacific.

During the quarter, TCS had a net addition of 5,279 people. The total employee strength at the end of the first quarter stood at 3,24,935 people on a consolidated basis. The attrition rate on a last twelve month basis (LTM) was seasonally higher at 15.9 percent. The utilisation rate (excluding trainees) was at a high of 86.3 percent and after including trainees, it was 82.9 percent. TCS also announced an interim dividend payout of Rs 5.50 per equity share of Re 1 each.

Shares of TCS closed at Rs 2,521.40, down by 2.80 percent on the Bombay Stock Exchange on Thursday. The sensitive index, Sensex, ended the day marginally down by 0.41 percent.

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