India’s biggest IT services firm TCS reported a net profit of Rs. 5,945 crore in the April-June quarter on revenues of Rs. 29,584 crore. Hurt by volatile currencies, TCS’ net profit fell 10 per cent compared to the March quarter. TCS had reported net profit of Rs. 6,608 crore on revenues of Rs. 29,642 crore in the March quarter. Global brokerage Morgan Stanley expected TCS to report net profit of Rs.5,999 crore on revenue of Rs. 29,797 crore in the June quarter.
The appreciation of the rupee resulted in a loss of Rs. 650 crore in reported revenue, TCS added. The rupee has also risen over 5 per cent against the dollar this year. For IT companies which earn bulk of their revenues in US dollars, this means lower revenue in rupee terms.
The widely tracked dollar revenue of TCS came in at $4,591 million, up 3.1 per cent sequentially.
Commenting on the Q1 performance, CEO and MD, Rajesh Gopinathan said: “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 from customers have given us the right start to the year.”
TCS’ operating margin fell to 23.4 per cent in June quarter from 25.7 per cent in March quarter. V. Ramakrishnan, chief financial officer, said: “During the quarter high currency volatility including sharp rupee appreciation against the dollar resulted in Rs. 650 crore loss in reported revenues. We remain disciplined in our financial management, stay focused on generating strong cash flows and invest in our digital business. Despite the impact of wage hike in Q1, we continue to drive profitability to our targeted range.”
TCS shares closed 0.28 per cent higher at Rs. 2,446 today. TCS earnings came post market hours.
TCS shares have underperformed the broader markets amid concerns over the overall IT sector. TCS shares have gained 3.40 per cent this year so far, compared to 20.32 per cent gain in the broader Sensex. Indian IT sector is facing challenges in the business environment and stricter work permit regime in countries like the US, Singapore, Australia and New Zealand. The IT firms are also under pressure to hire local workers instead of taking Indian employees on work visas to client sites as the US hardens its stance on outsourcing. Higher on-site hiring means higher costs.
TCS said that its total employee strength at the end of June quarter was 3.85 lakh with gross addition of 11,202 and net addition of 1,414 during the quarter. TCS’ global HR Head Ajoy Mukherjee said: “We continue to hire talent across markets and help TCSers gain new digital skills so that they can participate successfully in digital economy.”
