TCS Logs in 4.4% Profit Growth in Q4, Sees Better Days Ahead

Stating that fiscal 2017-18 has been a “sobering year” on slower revenue growth, the nation’s largest software exporter TCS on Thursday reported a 4.4 percent rise in March quarter net profit at Rs 6,904 crore and guided towards a better show in fiscal 2019.

The Tata group flagship, which contributes around 85 per cent of the group profit, reported a revenue growth of 8.2 percent at Rs 32,075 crore for the three months to March. In dollar terms, the company had its highest revenue growth in 14 quarters at 11.7 per cent.
For the full fiscal year to March 2018, the company saw its net profit dip 1.7 percent to Rs 25,826 crore, though revenue rose 4.3 percent to Rs 1.23 lakh crore.
“To some extent (it has been) a sobering year that it is both a time of optimism as well as the fact that the year has actually been lower (on revenue growth) than in the recent past,” managing director and chief executive Rajesh Gopinathan told reporters here.
He was quick to add, however, that they are on the right trajectory and will achieve the targeted double-digit growth in dollar revenue in FY19, pointing out to the 11.7 per cent growth achieved in the March quarter.

Industry lobby Nasscom has given a marginally lower revenue growth guidance for the industry at 6-7 percent for FY19, down from the 7-8 percentage points forecast for FY18.

For the quarter under review, TCS reported a USD 185 million increase in dollar revenue, the highest ever quarterly growth in its history.

Operating margins stood at 25.4 percent, but Gopinathan said it continues to aspire for the 26-28 per cent level which eluded across the four quarters of FY18.

In FY18, it reported a massive 0.90 percent narrowing in the operating margin to 24.8 per cent on a 0.70 per cent impact from currency headwinds and the rest from operational efficiencies and wage hikes.

It will depend on levers like operational efficiencies, offering newer services and a greater thrust on the growing digital stream to widen the margins, he said.

After remaining “soft” for much of the year, banking and finance sector along with the North America businesses, the largest revenue contributors from a sectoral and geographical perspectives, are showing some optimism, he said.

Gopinathan said the company is “incrementally more confident”, citing client conversations among others.

Chief financial officer V Ramakrishnan said he expects a bit of uptick in tax outgo during the fiscal but added that it will be within the 24-25 per cent band.

The company, which announced a spate of large deal wins in the last two quarters, has been able to do so on the back of early investments in markets like continental Europe, among other reasons, Gopinathan said.

TCS has seen healthy deal wins during the year, adding three clients in the USD 100-million band, 13 clients in the USD 50-million band, 17 clients in the USD 20-million bracket and 40 in the USD 10-million bracket, Gopinathan said.

From a segmental revenue point of view, barring BFSIs, all of them grew above company average, on the back of double-digits growth in the energy and utilities vertical (33.7 per cent), travel and hospitality (25.4 per cent) and life sciences and healthcare clipping at 12.6 per cent.

Geographically, Continental Europe grew 19.1 per cent, Britain at 10.7 per cent and Asia Pacific at 8.6 per cent and North America at 4.9 per cent.

The share of the upcoming digital field in the overall revenue pie has grown to 23.8 per cent on the back of a massive 42.8 percent growth, contributing USD 4 billion to the topline in FY18, Gopinathan said.

TCS closed FY18 with a total headcount of 3.95 lakh, up by over 7,700 over the last year and HR head Ajoy Mukherjee said it has made 20,000 offers to trainees, the same as last fiscal, and added that the lateral hires will be need-based.

TCS has announced a wage hike of 2-6 per cent depending on the geography, while it has also announced a 120 per cent payout of target variable pay.

It also announced a 1:1 bonus of shares and a dividend of Rs 29 a share, taking the total payout to shareholders at Rs 50 for the year. It has given out close to Rs 26,000 crore to the shareholders in dividends and bonuses in the year.

TCS counter closed 0.99 per cent up at Rs 3,190.65 on the BSE as against 28 bps gain in the benchmark.

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