Tata Consultancy Services Ltd

Particulars (In Rs. Cr.) Q3FY21 Q2FY21 Q3FY20 QoQ % YoY%
Revenue from Operations 42015 40135 39854 4.68% 5.42%
Other Income 691 914 818 -24.40% -15.53%
Total Income 42706 41049 40672 4.04% 5.00%
Employee Benefit Expenses 23431 22665 21622 3.38% 8.37%
Employee benefit Expenses as % of Sales 55.77% 56.47% 54.25%
EBIT 11184 10515 9974 6.36% 12.13%
EBIT Margin 26.62% 26.20% 25.03% 42 bps 159 bps
Profit After Tax 8727 7504 8143 16.30% 7.17%
PATM (%) 20.44% 18.28% 20.02% 216 bps 42 bps
Segment Revenue Q3FY21 Q2FY21 Q3FY20 QoQ % YoY%
BFSI 16,655 16,138 15,483 3.20% 7.57%
Manufacturing 4,027 3,826 4,171 5.25% -3.45%
Retail and-Consumer Business 6,546 6,353 6,709 3.04% -2.43%
Communication, Media and Technology 6,980 6,560 6,608 6.40% 5.63%
Others 7,807 7,258 6,883 7.56% 13.42%


Result Highlight:

  • TCS Consolidated Revenue rose 4.7% QoQ to Rs 42015 crore—higher than the estimated Rs 41,350 crore.
  • Dollar revenue rose 5.1% to $5,700.6 million.
  • Operating Profit Margin expanded to 26.6% from 26.2% last quarter.
  • Net profit rose7.2%to Rs 8727 crore for the December quarter compared with Rs 8143 crore in the same quarter last year. Reported strong Net Cash from Operations at Rs.11,952 crore which is 137.4% of Net Profit
  • Attrition rate dips to a new all-time low at 7.6%. Management provided ‘double-digit’ outlook for FY22
  • Largest 2 business verticals, BFSI and Retail, showed good sequential growth in a seasonally weak quarter. BFSI grew 2% quarter-on-quarter, one of its best December quarters in the recent past.
  • All markets showed good sequential growth, with North America growing +3.3%, UK +4.5%, and Continental Europe +2.5%: Emerging markets also grew well, with India growing 18.1% and MEA +6.7%.
  • Deal TCV was at US$6.8 billion, up 13.3% YoY. Adjusting for large deal in the previous quarter, the company’s deal TCV increased 11.4% QoQ.
  • The company approved an interim dividend of Rs 6 per share.

Management commentary:

  • Commenting on the Q2 performance, Rajesh Gopinathan, Chief Executive Officer and Managing Director, said: “Growing demand for core transformation services and strong revenue conversion from earlier deals have driven a powerful momentum that helped us overcome seasonal headwinds and post one of our best performances in a December quarter. We are entering the new year on an optimistic note, our market position stronger than ever before, and our confidence reinforced by the continued strength in our order book and deal pipeline”.
  • V Ramakrishnan, Chief Financial Officer, said: “Strong growth across all our verticals, and operational benefits from our SBWS model allowed us to post the highest operating margin in the last five years, even after rolling out a salary increase this quarter. We also had an alI-time high cash conversion in Q3. This and our strong balance sheet position us very strongly to seize the opportunities that the current market offers, and more closely partner our customers in their growth and transformation journeys.”

Conference Call Highlights 

  • The Life Sciences & Healthcare vertical continued to outperform, growing 5.2% sequentially and 18.2% on a year-on-year basis.
  • Operating efficiencies brought about by SBWS (Secure Borderless Workspaces) operating model, aided by operating leverage from growth and a little bit of currency support, helped the company to mitigate the impact of the salary increase and still expand EBIT margin sequentially by 0.4% Q-on-Q to 26.6%.
  • Total contract value signed this quarter is $6.8 billion.BFSI has delivered $2.6 billion TCV in this quarter.Of the 2 large deals in BFSI signed in Q3, the Prudential Financial deal was closed in mid-December, but very little to the revenue was added in this quarter. And the Postbank Systems deal was closed actually on January 1.
  • BFSI demand is also very strong and the company is very positive about it.
  • TCS has been a global industry benchmark for talent retention. In Q3, LTM attrition in IT services, which includes all departures, voluntary and involuntary, was at 7.6%, an all-time low.
  • Cloud adoption is driving a multiyear technology spending cycle and that this will remain a secular growth driver for us over the next 3 to 5 years with the transformation playing out over multiple horizons.


Tata Consultancy Services (TCS) managed to beat Street expectations on revenue and margin front in the quarter ended December. TCS posted its strongest third-quarter result in nine years. While the company took a salary hike in October it was able to offset the costs due to operational efficiencies resulting in margin improvement. The company does not give yearly revenue guidance however provides strong double digit growth guidance for FY22.While all markets showed good sequential growth, domestic business progressed well as growth in India jumped 18 per cent. TCS services attrition rate hit an all-time low at 7.6 percent LTM, adding investments in people, progressive HR policies and an empowering culture have made TCS the global industry benchmark in talent retention. Owing to the COVID-19, the digital transformation across sectors have accelerated and this will help TCS to leverage their expertise and gain more business. On performance front, we expect company to report EPS of Rs.97 for FY22E. At CMP of Rs.3123, PE works out to be 32 times. Hence, investors can buy this stock at CMP Rs.3123 for the target of Rs.3600 with time horizon of next 9-12 months.