TCS clocks record revenue on higher banking, retail business
Tata Consultancy Services (TCS), the largest IT services company in India, reported 14.3% rise in revenue in constant currency for the fourth quarter helped by strong performance in its banking and retail sector, which contribute more than half to its topline.
On a reported basis, revenue was up about 12% to $6.7 billion compared to the same period last year while net profit was up 3.7% to $1.3 billion. The company added $3.5 billion incremental revenue in the last fiscal, its highest ever as companies embark rapidly on a digital transformation journey accentuated by the pandemic.
“We are closing FY22 on a strong note, with mid-teen growth and adding the maximum incremental revenue ever. Increasing participation in our customers’ growth and transformation journeys and an all- time high order book provide a strong and sustainable foundation for continued growth ahead,” said Rajesh Gopinathan, Chief Executive Officer and Managing Director.
Rajesh, who recently completed five years at the helm, added that here has been a steady growth across geographies with North America leading the pack while growth in banking financial services and insurance (BFSI) has also been good considering it is coming off a large base in the previous year.
Annual revenue stood at $25.7 billion, a rise of 15.4% in constant currency while annual net profit was up 13.3% to $5.1 billion. Operating margin, however, slipped 60 basis points to 25.3%.
The biggest positive, as per TCS, was the strong order book worth $11.3 billion in the fourth quarter and $34.6 billion for the full year. A large part of the order book, about $6.5 billion, was from North America highlighting the growth prospects in the geography. Two deals were worth more than $1 billion each.
“While large deals are difficult to predict, we see a trend of total contract value (TCV) growing to about $8 billion range from $6-7 billion in the days to come,” he said.
North America, the company’s biggest market, grew 18.7% on constant currency. Constant currency discounts the impact of currency fluctuations, over which the companies have no control. Continental Europe was up 10.1% while UK grew 13%.
BFSI, the bread and butter for all IT companies, was yet again the main growth lever growing at 13%. Retail and CPG, the second largest vertical and which also includes travel and hospitality, was up 22% and reported more than $1 billion in quarterly revenue.
Operating margin for the quarter was also down 180 basis points to 25%. “Operating margins remained flat sequentially but long-term cost structures are well placed to ensure that we double down on the operating lovers to remain close to the margin band of 26-28%,” said Samir Seksaria, Chief Financial Officer.
The company’s attrition rose to 17.4% from 15.3% though it remained below industry levels. TCS added 35,209 people in the quarter, a mix of fresh engineering graduates and lateral hires and more than 100,000 people in the year. “We are keeping a target of hiring 40,000 people from the campuses this year and can ramp up and down based on the demand as the NQT (National Qualifier Test) gives us the opportunity to do so,” said N Ganapathy Subramaniam, Chief Operating Officer.