Calendar Year Revenue Hits $25 Billion
TCS reports strong broad-based growth in third quarter
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TCS reports strong broad-based growth in third quarter
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Tata Consultancy Services (TCS), the second largest IT services company in the world by market capitalization, reported a 15.4% growth in constant currency terms in the third quarter helped by clients across geographies and verticals who continued with their digital transformation journey to better manage the pandemic-led disruptions.
The company also approved a buyback plan of 4 crore shares for an aggregate amount not exceeding Rs 18,000 crore. The buyback size amounts to 1.08% of the total paid-up equity share capital and TCS will buy shares at Rs 4,500 per share, a premium of 16.67% over the last trading price.
On a reported basis, TCS’s revenue was up 14.4% to $6.5 billion compared to the same period last year while sequentially – comparing the third quarter to the second – it was up 3%. The company also touched the landmark revenue of $25 billion in a calendar year. Net income was up 10.5% to $1.3 billion.
“It was an exceptional quarter in a seasonally weak one,” said chief executive Rajesh Gopinathan. “The growth has been broad based, across market and segments. Customers love our engagement model, our end-to-end capability, and our can-do approach to problem solving. While mapping out their innovation and growth journeys, we are also helping them execute new-age operating model transformations to support those journeys.”
Growth was driven by North America, the company’s biggest market, which grew 18% on constant currency. Constant currency discounts the impact of currency fluctuations, over which the companies have no control. Continental Europe was up 17.5% while UK grew slower than the rest at 12.7%.
BFSI (banking, financial service and insurance), the bread and butter for all IT companies, was yet again the main growth lever, growing at 18%. Retail and CPG, the second largest vertical and which also includes travel and hospitality, was up 20.4%. Other verticals such as life sciences and manufacturing were up 16.3% and 18.3% respectively.
“In BFSI, we signed TCV (total contract value) of $2.9 billion while for retail it was $1 billion. In manufacturing, we have seen very strong participation across board and especially in automotive in North America and Europe. Banks are investing in payment modernization, customer experience and digitization. We are participating in the full demand spectrum and are confident of the overall future,” added Gopinathan.
Chief operating officer NG Subramaniam said apart from the traditional deal spaces, the company was also looking into the areas of future – notably crypto exchange and settlement technology and carbon credit marketplaces. “With cloud being the growth driver, there is no reduction in client’s budgets and they are investing more in digital.”
Operating margin for TCS was, however, down 160 basis points to 25% as it spent more to bring in and retain talent at a time when the IT industry is grappling with talent crunch for some time now. TCS has said earlier it wants to maintain margins within 26% and 28% range. “We remain focused on long term talent development as well as on tactical measures to mitigate the talent churn. We have exercised various operating levers in Q3 to mitigate the higher costs and manage our employee expense,” said chief financial officer Samir Seksaria.
The company’s attrition rose to 15.3% from 11.9% in the second quarter but it was still below the industry levels. TCS added 28,238 people in the quarter, a mix of fresh engineering graduates and lateral hires. Milind Lakkad, executive vice president and chief human resources officer, said he expects the attrition levels to flatten out in the coming days. TCS promoted 110,000 people in the last nine months of the fiscal and will promote another 40,000 in the fourth quarter. At the end of December, TCS had 556,986 employees on its rolls with more than 200,000 women which made up 36% of its workforce.
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