Tata Consultancy Services (TCS), the country’s largest Information Technology Services provider on Thursday delivered a strong set of numbers in the fourth quarter, its best in the last 12 quarters, as well as the full year of FY18. The company for the first time in last 12 quarters posted double digit revenue growth in USD terms in March quarter while the management exuded confidence to sustain this growth number in the coming quarters.
The company’s net profit, as well as revenues in the quarter, beat the Street estimates while margin growth was slightly below the industry expectation primarily owing to cross currency volatility.
In the quarter ended March 31, 2018, the Mumbai-headquartered company posted Rs 69 billion in net profit, a growth of 4.47% on year-on-year basis while sequentially (compared with the trailing quarter) it grew 5.71%. TCS’ revenues in the quarter at Rs 320.75 billion, grew at a healthy rate of 8.2% compared with the corresponding period last year while on QoQ terms, it grew 3.8%, backed by a volume growth (growth in billed man-hours in the quarter) of 2%.
An estimate by Reuters based on analysts’ projections had pegged TCS’s Q4 net profit and revenues to be Rs 68.12 billion and Rs 316 billion respectively.
“We are quite happy with the positive response to our strategy in the market,” CEO & MD Rajesh Gopaniathan said during the post-earnings call. “Strong demand in digital across all industry verticals and large transformational deal wins have made this one of our best fourth quarters in recent years,” he added.
In Q4, digital services accounted for 23.8% of its overall revenues and grew at a healthy rate of 42.8% when compared with the same period last year.
"TCS has delivered a good show for Q4FY18, with revenues growth and profitability ahead of estimates, though margin performance was a tad below expectations owing to higher variable payouts. Management commentary was quite encouraging on digital piece, which grew by 43% YoY and 10% QoQ, contributing 23.8% of its revenues," said Sanjeev Hota, AVP Research, Sharekhan by BNP Paribas, in a post-earning report.
For the full year (FY18), TCS’s net profit saw a decline of 1.76% at Rs 258 billion while the revenues grew 4.4% at Rs 1,231 billion. In dollar terms, the company’s Q4 net profit grew 5.7% at $1.07 billion on YoY basis and revenues recorded a healthy double-digit growth of 11.7% at $4.97 billion. For FY18, the company’s revenues grew 8.6% to $19.09 billion. The full year margin, however, contracted by 90 basis points, primarily due to currency depreciation.
“We are executing on our Business 4.0 strategy and that is paying off very well,” N Ganapathy Subramaniam, Chief Operating Officer & Executive Director. “Six of our industry verticals grew above the company average in FY18, four of them growing double digits. Strong deal wins and a good pipeline positions us very well in the new fiscal.”
Most of the business verticals showed strong growth, except for the banking and financial services business in North America, which the company said is still showing some softness but could improve in the Q1 of FY19. The growth during the quarter was again led by Europe, especially the UK, backed by large deal wins. During the year, the company added 66 new customers including three clients who generate $100 million and more in annual revenue and 15 customers who generate more than $50 million in annual revenue.
Interestingly, the company added around 4.118 people on net basis in the Q4, the highest number of employees' addition in a quarter during FY18 even as the attrition rate continued to slide and ended at 11% in FY18. During the quarter, the company said, it has given 120% of variable pay to the employees, also the highest during the fiscal.
“The company entered into double-digit revenue growth in USD terms after Q4FY15. The management sounded optimistic to drive double-digit revenue growth in FY19,” said a post-earnings note by Axis Capital. “Moreover, the company highlighted bottoming out challenges I BFSI/North America with growth returning back from Q1FY19,” it added.
The company’s net profit, as well as revenues in the quarter, beat the Street estimates while margin growth was slightly below the industry expectation primarily owing to cross currency volatility.
In the quarter ended March 31, 2018, the Mumbai-headquartered company posted Rs 69 billion in net profit, a growth of 4.47% on year-on-year basis while sequentially (compared with the trailing quarter) it grew 5.71%. TCS’ revenues in the quarter at Rs 320.75 billion, grew at a healthy rate of 8.2% compared with the corresponding period last year while on QoQ terms, it grew 3.8%, backed by a volume growth (growth in billed man-hours in the quarter) of 2%.
An estimate by Reuters based on analysts’ projections had pegged TCS’s Q4 net profit and revenues to be Rs 68.12 billion and Rs 316 billion respectively.
“We are quite happy with the positive response to our strategy in the market,” CEO & MD Rajesh Gopaniathan said during the post-earnings call. “Strong demand in digital across all industry verticals and large transformational deal wins have made this one of our best fourth quarters in recent years,” he added.
In Q4, digital services accounted for 23.8% of its overall revenues and grew at a healthy rate of 42.8% when compared with the same period last year.
"TCS has delivered a good show for Q4FY18, with revenues growth and profitability ahead of estimates, though margin performance was a tad below expectations owing to higher variable payouts. Management commentary was quite encouraging on digital piece, which grew by 43% YoY and 10% QoQ, contributing 23.8% of its revenues," said Sanjeev Hota, AVP Research, Sharekhan by BNP Paribas, in a post-earning report.
For the full year (FY18), TCS’s net profit saw a decline of 1.76% at Rs 258 billion while the revenues grew 4.4% at Rs 1,231 billion. In dollar terms, the company’s Q4 net profit grew 5.7% at $1.07 billion on YoY basis and revenues recorded a healthy double-digit growth of 11.7% at $4.97 billion. For FY18, the company’s revenues grew 8.6% to $19.09 billion. The full year margin, however, contracted by 90 basis points, primarily due to currency depreciation.
“We are executing on our Business 4.0 strategy and that is paying off very well,” N Ganapathy Subramaniam, Chief Operating Officer & Executive Director. “Six of our industry verticals grew above the company average in FY18, four of them growing double digits. Strong deal wins and a good pipeline positions us very well in the new fiscal.”
Most of the business verticals showed strong growth, except for the banking and financial services business in North America, which the company said is still showing some softness but could improve in the Q1 of FY19. The growth during the quarter was again led by Europe, especially the UK, backed by large deal wins. During the year, the company added 66 new customers including three clients who generate $100 million and more in annual revenue and 15 customers who generate more than $50 million in annual revenue.
Interestingly, the company added around 4.118 people on net basis in the Q4, the highest number of employees' addition in a quarter during FY18 even as the attrition rate continued to slide and ended at 11% in FY18. During the quarter, the company said, it has given 120% of variable pay to the employees, also the highest during the fiscal.
“The company entered into double-digit revenue growth in USD terms after Q4FY15. The management sounded optimistic to drive double-digit revenue growth in FY19,” said a post-earnings note by Axis Capital. “Moreover, the company highlighted bottoming out challenges I BFSI/North America with growth returning back from Q1FY19,” it added.
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