TCS Q3 earnings: 24% spike in third quarter net at Rs 8105 cr makes firm bullish on 2019

The country's largest software exporter Tata Consultancy Services (TCS) on Thursday posted 24.1 per cent growth in the December quarter.

The revenue of the company clipped at 20.8 percent to Rs 37,338 crore. (Image: AFP)

Mumbai: The country's largest software exporter Tata Consultancy Services (TCS)  on Thursday posted 24.1 per cent growth in the December quarter net income at Rs 8,105 crore, its highest ever, and guided towards a healthy 2019 saying it has a "strong" order pipeline. The revenue of the company, which is the mainstay of profit for the diversified Tata Group, clipped at 20.8 percent to Rs 37,338 crore driven by a pick-up in its key North American market, while the key segment of banking, financial services and insurance also did well logging in a 23 percent growth during the quarter. "We have had good order closures this quarter, and strong pipeline built up...a strong pipeline and a strong order flow set us up nicely for the new calendar year," managing director and chief executive Rajesh Gopinathan told reporters announcing the numbers. Drawing on from his interactions with the clients, he said none of them have hinted at a dip in their IT spends but was quick to note that the picture will be clearer by the middle of the March quarter. Gopinathan said the total contracts closed in the reporting quarter stood at USD 5.9 billion compared to USD 4.9 billion over a year ago and added that they were able to add one USD 100-million-plus client during the reporting three months period. On the profitability front, operating margins dipped a tad-90 bps to be precise--to 25.6 per cent sequentially, primarily on currency movements and a rise in the cost of sub-contracted work. Chief financial officer V Ramakrishnan said the company still strives to get the operating profit margin up to the desired level of 26-28 per cent and added it has come in at 25.7 per cent in the first nine months of FY19. Share of the upcoming digital revenue rose to 30 percent of the overall revenue pie, which is a 50 percent spike over the last year, he said. Chief operating officer N Ganapthy Subramaniam chipped in saying that the 100 per cent digital revenue expectation may come in earlier than expected. Gopinathan said the company is well positioned to deliver a double-digit revenue growth for the full year, but pointed to some softness in the financials segment in continental Europe and Britain, and also mixed fortunes being shown by the retail sector there. On the human resources front, TCS, already the largest employer in the segment, added a net of 6,700 employees during the quarter, taking the overall additions so far this fiscal year to 23,000 and now boasts of a staff strength of nearly 4.18 lakh, with an attrition rate of only 11.2 per cent. Global chief of human resources Ajoy Mukherjee said the company has hired its highest-ever number of people in the US in 2018 where Indian software firms have for long been facing a backlash for cost arbitrage on the labour front. He did not give a number of hires in the US, but said that it goes to 70 universities for hiring. The company had cash/cash equivalent of over Rs 43,000 crore in hand at the end of the reporting period and continues to look for acquisitions if they fit well in its strategy and at the right price, Gopinathan said, adding, "we are active in the deal market". It can be noted that TCS has returned cash worth Rs 16,000 crore each to shareholders for two consecutive years as it has not been able to successfully deploy its cash. The company also announced an interim dividend of Rs 4 a share, with a record date of January 18. Gopinathan said the two small acquisitions in November have ensured that companies get integrated fast enough. Analysts at the BNP Paribas-owned brokerage Sharekhan said the revenue uptick was at par with expectations, but TCS missed the mark on margins. The TCS counter ended the session flat at Rs 1,888.15 on the BSE, as against a 0.29 per cent correction in the benchmark. Its closest rival Infosys is set to announce its numbers Friday.