TCS posts flat profit of Rs 8,118 cr for Q3

Mumbai: The country's largest software exporter TCS on Friday reported a flat December quarter net profit at Rs 8,118 crore and also made it clear that it will not be able to notch a double-digit revenue growth in 2019-20.

The Tata group company had posted a post tax net of Rs 8,105 crore in the year-ago period.

Performance for the October-December period is better than the previous six months, but it said clients in its largest banking and finance sector are going minimalistic with their tech spends and also blamed dividend payouts for the crimped bottomline.

Its overall revenues grew by 6.7 per cent to Rs 39,854 crore under the IFRS system in rupee terms, while the operating profit grew 4.3 per cent to Rs 9,564 crore. For the first nine months of 2019-20, it has achieved a 7.9 per cent revenue growth compared to the same period last fiscal.

When asked about the revenue growth for the fiscal, its managing director and chief executive Rajesh Gopinathan said it will not be able to achieve a double-digit growth and blamed sluggish first half for it.

"Last year we did 11.4 per cent. We are not going to be anywhere near that. If we do better than 8 (per cent), I will be quite happy," he told reporters here.

The widely tracked operating margin narrowed by 0.59 per cent to 25 per cent, but was up 1 percentage point when compared with the preceding quarter on currency gains and operational improvements.

From a geographical and sectoral perspective, he said progress in banking, financial services and insurance, along with retail in its largest market of North America is difficult.

The company's chief operating officer N Ganapathy Subramaniam said the company has done well in the BFSI sector and has won market share in the last four quarters.

He, however, also explained a few shifts in the marketplace which may be impacting its revenues.

"In large quarters, more for less is giving into less is more. They are all adopting AI and automation as the main lever to bring things together, to integrate tech operations. The intent is to bring things together and optimise," he said.

Subramaniam also said that revenue growth for IT companies is coming down because of the efficiencies they themselves have got to BFSI clients.

Gopinathan said the company closed deals of $6 billion during the quarter, taking the total contract value signed in 2019-20 till December to $18 billion, 22 per cent higher than the year-ago period.

From a hiring perspective, its new joiners during the quarter were less than last year, but Gopinathan explained that it has advanced the freshers' joining to first two quarters, pointing out that at 22,000 net hires in the first nine months, the number is at par with last year. The total headcount stands at 4.46 lakh employees.

Meanwhile, the company also discountinued the practice of reporting digital revenues separately, becoming the first big company in the industry to do so.

Gopinathan attributed the dip in profit growth to the impact of the Rs 20,000 crore special dividend payout done by the company in October.

Its chief financial officer V Ramakrishnan explained that the overall invested funds came down to Rs 43,000 crore from Rs 54,000 crore during the quarter, making a Rs 100 crore dent in interest income, while currency movements also resulted in an over Rs 400 crore impact on forex, which directly decreased the

profits.