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TCS quarterly growth flat in second quarter, company expresses hope for next Q3, Q4

Software Major Tata Consultancy Services On Thursday Reported A Lower-than-expected 8.4 Per Cent Rise In Net Profit At Rs 6,586 Crore For July-September But Expressed Optimism That Rest Of The Fiscal Would Be Better Than The Past Many Years And First Half Of This Year.

PTI | Updated on: 14 Oct 2016, 06:41:53 AM
TCS Q2 profit up 8.4% but below market view


Software major Tata Consultancy Services on Thursday reported a lower-than-expected 8.4 per cent rise in net profit at Rs 6,586 crore for July-September but expressed optimism that rest of the fiscal would be better than the past many years and first half of this year.

The consolidated revenue grew nearly 8 per cent to Rs 29,284 crore for the said quarter as against Rs 27,165 crore in July-September 2015.

Describing the second quarter as an extremely “unusual” one for the company, TCS managing director and chief executive N Chandrasekaran said, “I expect the Q3 and Q4 to be better than the similar quarters in the past many years and also the first two quarters as we expect most of the delayed project orders in Q2 to become materialised in the second half”.

“Of particular importance is the Rs 180 crore worth of contracts from the country which should have been executed in Q2. I hope this to be done in Q3,” he said.

He also said that the country’s largest company in terms on m-cap also expects to maintain margins, which jumped 130 bps to 26 per cent in the reporting quarter to be in the range of 26 to 28 per cent through the rest of the current year.

But analysts said this 1 percentage point rise in revenue growth is the lowest in the history of TCS, and the overall numbers are also much below the street expectation.

“TCS missed expectations on revenue growth badly which is the lowest sequential growth in its reporting history in an otherwise usually strong period,” Emkay Global said in a note.

Angel Broking also said the overall numbers are below its expectations though the margins and net income were much higher than forecast.

Traditionally, the second half of every year, especially the third quarter, is the worst for software companies in the country.

Incidentally, Chandrasekaran’s optimism comes admist the uncertainties about the outcome of the forthcoming American presidential polls scheduled for November 8 wherein the Republican hopeful Donald Trump has threatened to end outsourcing and put up many trade protectionist measures if elected to the White House. The US is the largest market for any domestic software exporter.

It also comes after British Prime Minister Theresa May’s statement that she would begin the Brexit process in a hard manner from March. TCS reported a marginal dip in its income from Britain in the reporting quarter.

Chandrasekaran, expects these two events not to have any serious impact on his business as “tech spending is a necessity in today’s world and at best some clients may delay investments in technology and digital interfaces.

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First Published : 13 Oct 2016, 09:30:00 PM