IT's shining bright: 10 takeaways from TCS' March quarter earnings

NEW DELHI: Here are ten takeaways from the fourth-quarter results of Mumbai-headquartered Tata Consultancy Services

Revenue and profit: TCS snapped a six-quarter spree of disappointing results. Revenue grew of 1.5% to $4.21 billion sequentially in dollar terms meeting analyst expectations. Net profit rose 1.3% to $938 million beating expectations. Analysts say they are now looking for consistency in reporting

Loses crown to Infosys: Despite its improved performance, TCS’ revenue growth failed to surpass rival Infosys. For the full-year, TCS’ revenue grew 11.9% in constant currency terms. Infosys reported 13.3% growth for the year. The National Association for Software and Services Companies had said the industry grew 12.3% in FY16.


Also Read: ​TCS beats expectations in Q4, reports revenue of $16.5 bn

Outlook for FY17: Burned by its own outlook in the past, TCS has ceased giving any kind of guidance. The most CEO N Chandrasekaran would say was that he expects a strong FY17. Nasscom said it expects the Indian IT industry to grow 10-12% in FY17. Infosys has said it expects its revenue to grow between 11.5% and 13.5% in the same period.

Epic Lawsuit: The results come three after the company was slapped with a nearly $1 billion verdict by a US jury in a case that involved the theft of trade secrets from Epic Systems. TCS declined to discuss the case. Analysts have said that the reputational damage could hurt the company, and the entire Indian IT industry, in the fast-growing healthcare space. CEO Chandrasekaran would only say that the company was ‘talking to the people it needs to talk to’ when questioned about the fall-out.

Digital Revenue: Digital now contributes 15.5% of TCS’ revenue, up from 13.7% in the third-quarter and it grew over 52% year-over-year. Digital services contributed $2.3 billion to the company full year revenue of $16.5 billion. The company said it had trained 120,000 employees on digital technologies in FY16.

Automation Impact: TCS hired 90,182 people in FY16, its highest ever gross addition and indicated that its hiring would decrease in the current financial year due to the impact of automation. TCS said it would hire fewer laterals going forward, a trend that it expects to continue.

Margins: TCS' operating margin contracted by 54 basis points sequentially to 26.1%, just staying within its 26-28% desired margin band.

Hikes: TCS said it had announced its annual wage revisions for employees in the quarter. Hikes for employees in India would range from 8-12%, while those in other countries would range from 2-6%. The company also announced 100% variable pay.

Client Additions: TCS said the number of clients who contribute more than $100 million in revenue rose by three and the number of clients who contribute more than $50 million in revenue rose by eight and the number of clients who contribute more than $10 million rose by 17.

Verticals: TCS reported about 3.2% constant currency sequential growth in banking and financial services, a segment that had been closely watched due to Cognizant’s pessimistic outlook earlier this year. Manufacturing grew 3.9%, Retail grew 2.1%. Revenue from Hi-Tech, however, fell 1.5%.