Stellar numbers: TCS roars back to recovery, to resume salary hikes from October

Tata Consultancy Services (TCS) on Wednesday reported a stellar set of numbers for the three months to September with a consolidated net profit of Rs 8,433 crore, an increase of 20.3% sequentially. This excludes the provision of Rs 1,218 crore in the EPIC Systems Corporation legal case.

Consolidated revenues came in at Rs 40,135 crore, up 4.7% sequentially, beating estimates handsomely. The software services exporter reported ebit margins of 26.2%, an eight-quarter high.

Rajesh Gopinathan, CEO and MD, said the company was in the midst of a sustainable demand recovery going by conversations with customers and the deal pipeline. “It is a pleasant surprise. The margin recovery has come in a little earlier than we had said it would. We are more confident about H2 now,” Gopinathan said.

The events of the last six months, the CEO said, have re-emphasised the importance of transformative technologies. “We have been well-positioned to take advantage of this,” he said.

Gopinathan said that while it was early to comment on the new H-1B visa rules announced by the US, the company’s business model is strong enough to withstand these challenges.

Deal closures at TCS amounted to $8.6 billion during the quarter were strong and includes a $2.5-billion deal with Phoenix Systems. Constant currency revenues rose 4.8% sequentially way ahead of estimates driven by good business from verticals such as BFSI, retail, life sciences and healthcare. The company’s core market of North America reported good business as did continental Europe.

The TCS board announced a Rs 16,000-crore buyback for 5.33 crore shares at Rs 3,000 apiece, a premium of 9% over Wednesday’s close of Rs 2,715.

The quarter saw a cash generation of Rs 10,618 crore. The net hires during Q2FY21 grew by 9,864 and the attrition rate continued to come in lower. The company will resume salary hikes from October.