Tata Consultancy Services Ltd
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Particulars (In Rs. Cr.) Q2FY21 Q1FY21 Q2FY20 QoQ % YoY%
Revenue from Operations 40135 38322 38977 4.73% 3.0%
Other Income 914 598 1361 52.84% -32.8%
Total Income 41049 38920 40338 5.47% 1.8%
Employee Benefit Expenses 22665 22093 21470 2.59% 5.6%
Employee benefit Expenses as % of Sales 56.5% 57.7% 55.1%
EBIT 10515 9048 9361 16.21% 12.33%
EBIT Margin 26.20% 23.61% 24.02% 259 bps 218 bps
Profit After Tax 7475 7008 8042 6.66% -7.1%
PATM (%) 18.21% 18.01% 19.94% 20 bps -173bps
Segment Revenue Q2FY21 Q1FY21 Q2FY20 QoQ % YoY%
BFSI 16,138 15,282 15,427 5.60% 4.61%
Manufacturing 3,826 3,884 4,039 -1.49% -5.27%
Retail and-Consumer Business 6,353 5,912 5,912 7.46% 7.46%
Communication, Media and Technology 6,560 6,495 6,383 1.00% 2.77%
Others 7,258 6,749 6,661 7.54% 8.96%

Result Highlight:

  • TCS Consolidated Revenue rose 4.73% QoQ to Rs 40,135 crore—higher than the estimated Rs 39,133 crore.

  • Dollar revenue rose 7.1% to $5,420 million.

  • Operating Profit Margin expanded to 26.2% from 23.6% last quarter.

  • Net profit fell 7.05 % to Rs 7,475 crore for the September quarter compared with Rs 8,042 crore in the same quarter last year, as the company set aside Rs 1,218 crore under exceptional items related to a US lawsuit.

  • On a sequential basis, Growth was led by BFSI (5.60%), retail and CPG (7.4%) and Life sciences and healthcare.

  • All markets showed good sequential growth, with North America growing 3.6%, UK +3.8%, and Continental Europe +6.1%: Emerging markets also grew well, with India growing 20%, MEA +8%.

  • TCS’ revenue and margin outperformance came on the back of strong deal wins. The company reported deal wins of $8.6 billion during the quarter. This includes the $2.5 billion contract with U.K.-based Phoenix Group which was announced earlier but executed between July-September.

  • The company approved an interim dividend of Rs 12 per share. Salary Increases to be Rolled Out, Effective October 1

Buyback Update:

The Board has approved a proposal to buy back up to 5,33,33,333 equity shares of TCS, being 1.42% of the total paid up equity share capital, at Rs 3,000 per equity share premium of 9.59 per cent from the last closing price for an aggregate amount not exceeding 16,000 crore.

 

It’s the third buyback by the company in four years, and the first by an IT firm this fiscal. TCS had previously made buybacks worth around Rs 16,000 crore each in 2017 and 2018 as part of its long-term capital allocation policy of returning excess cash to shareholders. Both buybacks were conducted at a premium to the company’s market value.

Management commentary:

  • Commenting on the Q2 performance, Rajesh Gopinathan, Chief Executive Officer and Managing Director, said: “Driving accelerated business value realization of our customers’ digital investments has resulted in broad-based revenue growth. The strong order book, a very robust deal pipeline, and continued market share gains give us confidence for the future. The company’s foray into health & health and hygiene segment with Viroprotekt has helped to push Royal health shield.

  • All-round performance this quarter is a huge endorsement of the increased relevance of our services and solutions to our clients as they pivot from risk mitigation to long-term resilience powered by cloud, digital and simplification of working methods.

  • TCS saw its attrition rate fall to 8.9%—an all-time low during the second quarter. “We continue to invest in our people and are doubling down on building newer capabilities to power the next leg of our growth and market share expansion,” Ramakrishnan said.

  • Albertsons, a leading food and drug retailer in the United States, selected TCS to advance its transformation journey by modernizing and migrating critical mainframe-based legacy systems to a public cloud.

Outlook:

Tata Consultancy Services (TCS) managed to beat Street expectations on revenue and margin front in the quarter ended September. The Profit of the company was impacted by the provision of Rs 1,218 crore in the EPIC Systems Corporation legal case. Total deals showed strong growth during the quarter stood at $8.6 billion compared with $6.9 billion in the June quarter and $8.9 billion in the March quarter. The company does not give yearly revenue guidance. While all markets showed good sequential growth, domestic business progressed well as growth in India jumped 20 per cent. TCS services attrition rate hit an all-time low at 8.9 percent LTM, adding investments in people, progressive HR policies and an empowering culture have made TCS the global industry benchmark in talent retention.

DISCLOSURE IN PURSUANCE OF SECTION 19 OF SEBI (RA) REGULATION 2014

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