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TCS: Q1 profit slips 13.8{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} YoY to Rs 7,008 cr, wins deals worth $6.9 bn


Tata Consultancy Services (TCS) kicked-off the earnings season for information technology (IT) companies for the April – June 2020 quarter of the financial year 2020-21 (Q1FY21) on Thursday and reported 13.8 per cent year-on-year (YoY) fall in its net profit at Rs 7,008 crore for the period under review.

The numbers also assume significance as Q1FY21 was marred by the Covid-19 induced national lockdown that started in March 2020-end. TCS is the first large-cap company to announce its financial performance for this period.

On a sequential basis, the net profit slipped 13 per cent. The company had logged a profit of Rs 8,131 crore in the year-ago period. Net sales/revenue came in at Rs 38,322 crore, up 0.4 per cent YoY.

IFRS Financial Statements

In constant currency terms, TCS’s revenue declined 6.3 per cent. The company’s earnings before interest and tax (EBIT) came in at Rs 9,048 crore, while EBIT margin stood at 23.6 per cent.

The Board of Directors at its meeting held on July 9, 2020, also declared an interim dividend of Rs 5 per equity share. The record date for the same is July 17 while the payment date is July 31, the company said in its press release.

Further, the company said it added new deals worth $6.9 billion during the recently concluded quarter.

In a preview note, analysts at UBS had pegged the revenue in rupee terms to decline 3.8 per cent quarter-on-quarter (QoQ) to Rs 38,414.5 crore, while earnings before interest and taxes (EBIT) margin was seen at 24.4 per cent – down 66 basis points (bps) QoQ. Net profit, according to their estimates, was expected to drop 11.8 per cent QoQ to Rs 7,100.1 crore. In dollar terms, revenue was seen falling 7.3 per cent QoQ and 8 per cent year-on-year (YoY), while constant currency revenue was expected to fall by 6.9 per cent QoQ and 6.8 per cent YoY. READ ANALYSTS’ EXPECTATIONS HERE

“The revenue impact of the pandemic played out broadly along the lines we had anticipated at the start of the quarter. It affected all verticals, with the exception of Life Sciences and Healthcare, with varying levels of impact. We believe it has bottomed out, and we should now start tracing our path to growth,” said Rajesh Gopinathan, Chief Executive Officer and Managing Director.

TCS numbers

Segment highlights

TCS’s Life Sciences & Healthcare segment grew at 13.8 per cent YoY. That apart, all other industry verticals showed declines. For instance, Banking, financial services and insurance (BFSI) declined 4.9 per cent, Retail & Consumer Packaged Goods (CPG) fell 12.9 per cent, Communications & Media fell 3.6 per cent, Manufacturing dipped 7.1 per cent and Technology & Services fell 4 per cent.

“We have taken a supportive approach to employees and vendors, and used other efficiency levers to limit the impact of the sharp revenue decline during the quarter, and still delivered an industry-leading operating margin. Disciplined execution resulted in superior cash conversion and a strong cash balance that positions us very well to weather the downturn,” said V Ramakrishnan, Chief Financial Officer.

Geographically, TCS witnessed demand contraction in all markets, except Europe (up 2.7 per cent) and Latin America (up 0.2 per cent). Growth in North America declined 6.1 per cent while UK slipped 8.5 per cent. Indian market fell 27.6 per cent, Asia Pacific was down 3.2 per cent while Middle East and Africa (MEA) declined 11.7 per cent.

Among other highlights, the company informed that its consolidated headcount at the end of the quarter stood at 443,676 and women constituted 36.2 per cent of the workforce. The company said it trained 3,53,000 employees in new technologies. Meanwhile, IT Services attrition rate stood at 11.1 per cent LTM (last twelve months).


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