TCS profit dips 10pc to Rs 5,945cr in Q1 on stronger rupee and wage hikes

MUMBAI, INDIA: IT bellwether, Tata Consultancy Services (TCS) started FY 2018 on a muted note with a lower-than-expected profit reported for Q1. Profit in the quarter dropped 10 percent sequentially to Rs 5,945 crore. Revenue also saw a sequential decline of 0.2 percent to Rs 29,584 crore. The street estimate was Rs 5,999 crore net profit on revenue of Rs 29,797 crore in the June quarter.

High currency volatility including sharp rupee appreciation against the dollar resulted in Rs 650 crore loss in reported revenues, V Ramakrishnan, CFO said.

Wage hike was another factor. The employee cost rose to Rs 16,183cr in Q1, 2018 compared to Rs 15,692cr of last quarter.

All industry verticals except retail and BFSI exhibited strong growth at over 3.5 percent sequentially, said the IT services major.

The contribution of Retail and BFSI vertical grew 2.0 percent and 2.3 percent QoQ respectively in constant currency, Energy & Utilities grew the most(7.6 percent) followed by Travel & Hospitality(7.0 percent), Life Sciences & Healthcare(4.7 percent), Communication & Media (3.9 percent), and Manufacturing(3.8 percent).

"We have seen steady growth across industries in Q1. Robust volumes from major markets driven by good client additions across revenue bands and accelerating digital adoption among customers have given us the right start to the year. We have had excellent wins across all markets and have a good deal pipeline across industries that positions us well for growth in FY18," said CEO & MD Rajesh Gopinathan.

Digital business contributed 18.9 percent to total revenue with 7.6 percent QoQ growth. TCS has repurposed organization structures and go-to-market teams and also introduced two new service lines in Q1 -Cognitive Business Operations and Digital Transformation services.

TCS reported 11 large deals across all verticals, of which 7 are from North America. It added 8 clients in $1 million band, 12 clients in $10 million category, and one new client each in $50 million and $100 million categories.

All major markets grew in constant currency terms with Europe leading the charge(5.9 percent QoQ growth in constant currency), followed by North America(1.7 percent QoQ) and UK(0.7 percent QoQ). Among growth markets, it said Latin America led the pack with 2.8 percent QoQ growth in constant currency followed by India(1.5 percent QoQ), Asia Pacific(1.2 percent QoQ) and MEA(0.7 percent QoQ).

During Q1, TCS reorganised its service lines in Q1, adding new lines like cognitive business operations (grew by 5 percent QoQ) and digital transformation services, which have robust pipeline.

The total attrition rate was at 12.4 percent including BPS, but IT attrition was less and stood at 11.6 percent in the last one year, said the company.