Tata Consultancy Services (TCS) of the Tata Group, which is the largest IT services company in India, reported its green quarterly results on 8th October 2021 with increasing revenue and net profits showing a healthy quarter and higher future growth, according to analysts. TCS marks the first IT company to publish its quarterly reports from the period July to September 2021.

Estimates of the TCS results

Tata Consultancy Services reported a green consolidated net profit for the quarter ended 30th September, 2021of Rs. 9,653 which is a 14.1 per cent year-on-year (YoY) growth, primarily driven by increased demand. It also reported a revenue from operations of Rs. 46,867, which was up 16.77 per cent YoY.

TCS has also announced an intern dividend of Rs. 7 per share, scheduled to be paid to the shareholders on 3rd November of this year.

According to Bloomberg Quint, the results reported for this quarter have been in line with the estimates.

The revenue from operations as reported by TCS showed a sustainable growth of 3.21 per cent in comparison to the previous quarter ended 30th June 2021. This figure of Rs. 46,867 was a growth of 16.77% when compared to the results published on 30th September, 2020.

A 4 per cent growth in total income was observed on a quarter-on-quarter (QoQ) from Rs 46,132 to Rs 47,978 and a 16.88 per cent growth on a YoY basis from Rs. 41,049. This was mainly attributed to a rise in other income from Rs 721 as of 30th June, 2021 to 1,111 on 30th September, 2021, which shows a growth of 54.09 per cent. On a YoY basis, other income is a growth of 21.55 per cent from an amount of Rs. 914.

Total expenses showed an increase of 3.09 per cent from Rs. 33,823 to Rs. 34,867 QoQ. This increase has been attributed to an increase in expenses incurred for Employee benefit expenses, Fees to external consultants, Depreciation and amortisation expense and other expenses. Expenses incurred in the Cost of equipment and software licences showed a decrease of 17.44 per cent QoQ and 19.92 per cent  YoY.

Earnings before interest and tax (EBIT) are reported as Rs. 12,969 from Rs. 12,309 in June 2021 and Rs. 11,255 in September 2020. This equates to a growth of 6.63 per cent QoQ and 15.23 per cent YoY.

TCS reported a net profit of Rs. 9,653 which was an increase of 6.89 per cent from Rs. 9,031 in June 2020 and an increase of 28.64 per cent from Rs. 7,504 as reported on 30th September 2020.

A steady growth in EPS was observed from 19.93 on 30th September 2020 to 24.35 in 30th June 2021 which increased to 26.02 in September 2021.

On a segment wise analysis, the sectors that TCS operates in for revenue generation are from Banking, Financial Services and Insurances (BFSI) sector, Manufacturing, Retail and Consumer Business, Communication, Media and Technology, Life Sciences and Healthcare and others.

Out of the revenue earned of Rs. 46,867, the Banking, Financial Services and Insurance have the major component of segment revenue contribution followed by the sector of Communication, Media and Technology which is just a litter high than the revenue earned by retail and consumer business. Each segment saw an increase in revenue, for both, QoQ and YoY,

Revenue earned from the BFSI sector was Rs. 18,445 which has increased by 1.62 per cent from Rs. 18,151 in the previous quarter. This was also an increase of 14.30 per cent from Rs. 16,138. The segment of life sciences and healthcare also reported a growth on similar lines of 1.61 QoQ growth from Rs 4,899 to Rs. 4,978 but was a 19.11 per cent YoY growth from Rs. 3,098.

In terms of total segment result, a growth of 3.58 per cent was observed QoQ from Rs. 12,663 to Rs. 13,116. This was also an increase of 13.92 per cent to Rs. 11,513 when compared to 30th September, 2020. Again, the major component of the segment result is from the BFSI sector. Major growth in segment results was reported in the others segment.

Overall, the operating income increased from Rs. 11,442 to Rs. 11,858, which is an increase of 3.64 per cent QoQ. On a year-on-year basis, a significant growth of 29.98 per cent which was Rs. 9,123.

On the basis of Geography, North America grew by 17.4 per cent, which had the most significant growth as compared to the corresponding period of the previous fiscal year. This was followed by United Kingdom business growing by 15.6 per cent and growth in Continental Europe of 13.5 per cent.

In the segment of emerging markets, India posed to be ahead, reporting a growth per cent 20 per cent YoY, followed by Latin America which showed a growth of 15.2 per cent, closely followed by Middle East & Africa where a growth of 13.8 per cent was observed and lastly the Asia Pacific where 7.6 per cent was reported as the growth.

Comments by key personnel of TCS:

Rajesh Gopinathan, who is the current Chief Executive Officer as well as the Managing Director of TCS Ltd., , said that the strong and sustained demand environment was a once-in-a-decade opportunity to position themselves as the preferred growth and transformation partner for its customers.

Gopinathan also added that they are using the growth tailwind in order to invest in strengthening their relevant capabilities and building out a comprehensive portfolio of offerings that is capable of catering to a broader set of stakeholders constituting the company across business cycles, strengthening their brand, and adds to making their business more resilient. They also believe that it was the most sustainable pathway to create longer-term value for all stakeholders.” 

Rajesh Gopinathan has been reappointment as MD and CEO for the next five years, with the approval of the board of directors.

Samir Seksaria, the Chief Financial Officer of TCS, said, “Strong growth and disciplined execution helped the company overcome headwinds from currency and supply-side inflation and deliver expanded margins.”

N Ganpathy Subramaniam who is the Chief OperatingOfficer and Executive Director of TCS, said, “Products and platforms, TCS BaNCS, Quartz SmartLedgers, TwinX and TCS Cognix, all had marquee wins during the quarter and are increasingly driving business and operating model transformations in many markets.”

TCS share price, hit a record high of Rs 3,990 earlier on 8th October, which had gained 1.1 per cent to close at Rs 3,935.30 ahead of the September quarter earnings.  On closing at Rs. 3,943 on 8th October, on Monday morning, it opened at Rs. 3,675.75 on 11th October 2021 signifying a fall of about 6.77 per cent.