TCS reports strong numbers, product business grows faster in Q2

he firm posted a revenue of Rs 368.54 billion in Q2, up 11.5% y-o-y and 3.7% sequentially in constant currency terms

India's largest IT services company Tata Consultancy Services' (TCS') double-digit revenues growth (both in constant currency as well as $ terms) in the Q2FY19 was not only supplemented by large deal wins but also got a leg up from its product and platform business.

Though TCS does not give the breakdown of the revenue from products and platforms separately, the company clubs these numbers under the 'regional markets & others’ vertical segment, which witnessed 19.8 per cent growth on year-on-year (Y-o-Y) basis and 7.3 per cent in sequential term in the September quarter. The segment contributed 18.4 per cent to the total revenues during the quarter, making it the second-largest vertical after BFSI for TCS.

The firm reported revenue of Rs 368.54 billion in the second quarter, which was up 11.5 per cent Y-o-Y and 3.7 per cent sequentially in constant currency terms. While BFSI accounted for around 31.2 per cent of its total revenues, it was 15.9 per cent for retail & CPG.

“We report our platform revenue numbers there (in regional markets & others vertical). It (growth in this vertical) will continue for a few more quarters as these revenues start getting into a more steady state,” Rajesh Gopinathan, chief executive officer and managing director of TCS, said in the post-earnings analyst call.

In Q2FY19, the IT firm's core banking platform BaNCS had six new wins with five going live during this period. Similarly, its cognitive automation platform Ignio had seven deal wins across North America, Europe, and India.  iON, TCS' Cloud-based platform was adopted by four new clients, including Railway Recruitment Board implementing it for recruitment. A European pharma major adopted TCS’ drug development platform during this period.

“The success that we are seeing on our platform play is from repositioning it from being an operations and optimisation model, to being a growth and transformation enabler,” Gopinathan said.

The total value of contracts signed in the September quarter was $4.9 billion, out of which $1.5 billion was contributed by BFSI vertical, followed by Retail & CPG (deals with TCV of $0.7 billion).

The management has indicated its deal pipeline remains fairly strong with increasing traction in the US. Analysts are of the view that if the company wins more number of large deals, its platform revenue will get a further fillip. “TCS has domain expertise across multiple sectors owing to its Tata lineage, and this is helping them win more deals in the products space. Another differentiating factor is that the IT firm is bundling its platform along with its services offerings,” said Pareekh Jain, managing director, India, at HfS Research.