TCS Q2 results: Profit rises 8.4% YoY to Rs 10,431 crore

Tata Consultancy Services (TCS), India's largest software exporter, on Monday reported an 8.38 per cent year-on-year (YoY) rise in net profit at Rs 10,431 crore in September quarter compared with Rs 9,624 crore in the corresponding quarter last year.

Revenues from operations rose 18.01 per cent YoY to Rs 55,309 crore from Rs 46,867 crore in the same quarter last year, the IT firm said in an exchange filing. Revenue growth in constant currency (CC) terms stood at 15.4 per cent YoY, TCS said. 

ALSO READ: TCS Q2 preview: Analysts expect profit to grow in single digits; TCV seen at $8-8.5 bn

Ebit margin for the quarter came in at 24 per cent against 23.10 per cent in June quarter and 25.6 per cent in the year-ago quarter. 

The Mumbai-based IT firm said its total contract value (TCV) for the quarter stood at $8.1 billion against $8.2 billion in June quarter. Analysts were largely expecting a TCV of $8-8.5 billion. 

What the management says

Chief Executive Officer and Managing Director, Rajesh Gopinathan, said: “Demand for our services continues to be very strong. We registered strong, profitable growth across all our industry verticals and in all our major markets. Our order book is holding up well, with a healthy mix of growth and transformation initiatives, cloud migration and outsourcing engagements."

As clients prepare for a more challenging environment ahead, Gopinathan said, technologies like cloud that have been embraced now have to be fully leveraged to realise the promised value.

Attrition rate

The last twelve-month (LTM) IT Services attrition rate stood at 21.5 per cent, TCS said.  It saw a net headcount addition of 9,840 for the quarter, taking the workforce strength to 6,16,171.

Among key verticals, growth was led by retail and consumer packaged goods (up 22.9 per cent), communications & Media (up 18.7 per cent), and technology & services (up 15.9 per cent). 

Manufacturing and life Sciences & healthcare verticals grew at 14.5 per cent each while banking financial services and insurance (BFSI) grew at 13.1 per cent.

Geography-wise growth 

The growth in key geographies was led by North America (up 17.6 per cent growth), continental Europe (up 14.1 per cent) and UK grew (up 14.8 per cent). In emerging markets, India grew (up 16.7 per cent), Latin America grew (up 19 per cent), Middle East & Africa grew (up 8.2 per cent) and Asia Pacific grew (up 7 per cent), TCS said.

TCS said demand for cloud modernisation services continued across all hyperscaler cloud services to drive scalability, reliability, and business transformations in all industry verticals. 

In the case digital transformation services, Cloud ERP, customer experience, connected services and managed security were the themes that drove the growth in September quarter, TCS said.

Analyst's take

Mitul Shah - Head of Research at Reliance Securities said IT Services would not remain immune to worsening global macros in terms of rising inflation, economic slowdown, currency headwinds and likely cut on spending. 

"Revenue growth would taper down to low double digit in FY24E, while QoQ decline in order book, clear lower employee addition, higher attrition and lower pricing power ahead would lead to valuation multiple contraction close to its historical averages. Therefore, at present we have 'SELL' rating on TCS," Shah said.

TCS announced a second interim dividend of Rs 8 per share. 

Earlier, shares of TCS closed Monday's session at Rs 3,121.20 on BSE, up 1.84 per cent. Despite this, the scrip is down 18 per cent year-to-date.